Correlation Between Lincoln Electric and Better Home
Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and Better Home 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 Lincoln Electric and Better Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lincoln Electric Holdings and Better Home Finance, you can compare the effects of market volatilities on Lincoln Electric and Better Home 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 Lincoln Electric with a short position of Better Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and Better Home.
Diversification Opportunities for Lincoln Electric and Better Home
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lincoln and Better is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Better Home Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Home Finance and Lincoln Electric 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 Lincoln Electric Holdings are associated (or correlated) with Better Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Home Finance has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Better Home go up and down completely randomly.
Pair Corralation between Lincoln Electric and Better Home
Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 0.56 times more return on investment than Better Home. However, Lincoln Electric Holdings is 1.79 times less risky than Better Home. It trades about 0.26 of its potential returns per unit of risk. Better Home Finance is currently generating about 0.03 per unit of risk. If you would invest 19,256 in Lincoln Electric Holdings on September 1, 2024 and sell it today you would earn a total of 2,592 from holding Lincoln Electric Holdings or generate 13.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lincoln Electric Holdings vs. Better Home Finance
Performance |
| Timeline |
| Lincoln Electric Holdings |
| Better Home Finance |
Lincoln Electric and Better Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Electric and Better Home
The main advantage of trading using opposite Lincoln Electric and Better Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, Better Home 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 Better Home will offset losses from the drop in Better Home's long position.| Lincoln Electric vs. Timken Company | Lincoln Electric vs. Hillman Solutions Corp | Lincoln Electric vs. AB SKF | Lincoln Electric vs. Kennametal |
| Better Home vs. Thor Industries | Better Home vs. Mativ Holdings | Better Home vs. PACCAR Inc | Better Home vs. Wabash National |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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