Correlation Between Lincoln Electric and Black Hills
Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and Black Hills 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 Black Hills 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 Black Hills, you can compare the effects of market volatilities on Lincoln Electric and Black Hills 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 Black Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and Black Hills.
Diversification Opportunities for Lincoln Electric and Black Hills
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lincoln and Black is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills 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 Black Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hills has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Black Hills go up and down completely randomly.
Pair Corralation between Lincoln Electric and Black Hills
Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 1.69 times more return on investment than Black Hills. However, Lincoln Electric is 1.69 times more volatile than Black Hills. It trades about 0.26 of its potential returns per unit of risk. Black Hills is currently generating about 0.3 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 Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lincoln Electric Holdings vs. Black Hills
Performance |
| Timeline |
| Lincoln Electric Holdings |
| Black Hills |
Lincoln Electric and Black Hills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Electric and Black Hills
The main advantage of trading using opposite Lincoln Electric and Black Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, Black Hills 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 Black Hills will offset losses from the drop in Black Hills' long position.| Lincoln Electric vs. Hillman Solutions Corp | Lincoln Electric vs. AB SKF | Lincoln Electric vs. Kennametal |
| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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