Correlation Between Granite Falls and Lincoln Electric
Can any of the company-specific risk be diversified away by investing in both Granite Falls and Lincoln Electric at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Granite Falls and Lincoln Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Falls Energy and Lincoln Electric Holdings, you can compare the effects of market volatilities on Granite Falls and Lincoln Electric and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Granite Falls with a short position of Lincoln Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Falls and Lincoln Electric.
Diversification Opportunities for Granite Falls and Lincoln Electric
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Granite and Lincoln is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Granite Falls Energy and Lincoln Electric Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Electric Holdings and Granite Falls is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Granite Falls Energy are associated (or correlated) with Lincoln Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Electric Holdings has no effect on the direction of Granite Falls i.e., Granite Falls and Lincoln Electric go up and down completely randomly.
Pair Corralation between Granite Falls and Lincoln Electric
Given the investment horizon of 90 days Granite Falls Energy is expected to under-perform the Lincoln Electric. But the pink sheet apears to be less risky and, when comparing its historical volatility, Granite Falls Energy is 1.23 times less risky than Lincoln Electric. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Lincoln Electric Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 14,355 in Lincoln Electric Holdings on September 3, 2024 and sell it today you would earn a total of 7,399 from holding Lincoln Electric Holdings or generate 51.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Falls Energy vs. Lincoln Electric Holdings
Performance |
| Timeline |
| Granite Falls Energy |
| Lincoln Electric Holdings |
Granite Falls and Lincoln Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Falls and Lincoln Electric
The main advantage of trading using opposite Granite Falls and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Falls position performs unexpectedly, Lincoln Electric can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lincoln Electric will offset losses from the drop in Lincoln Electric's long position.| Granite Falls vs. Seadrill Limited | Granite Falls vs. Noble plc | Granite Falls vs. Borr Drilling | Granite Falls vs. SCOR PK |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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