Correlation Between Lincoln Electric and Estee Lauder
Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and Estee Lauder 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 Estee Lauder 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 Estee Lauder Companies, you can compare the effects of market volatilities on Lincoln Electric and Estee Lauder 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 Estee Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and Estee Lauder.
Diversification Opportunities for Lincoln Electric and Estee Lauder
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lincoln and Estee is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Estee Lauder Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Estee Lauder Companies 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 Estee Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Estee Lauder Companies has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Estee Lauder go up and down completely randomly.
Pair Corralation between Lincoln Electric and Estee Lauder
Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 0.47 times more return on investment than Estee Lauder. However, Lincoln Electric Holdings is 2.14 times less risky than Estee Lauder. It trades about 0.24 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about -0.15 per unit of risk. If you would invest 19,584 in Lincoln Electric Holdings on August 28, 2024 and sell it today you would earn a total of 2,410 from holding Lincoln Electric Holdings or generate 12.31% 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. Estee Lauder Companies
Performance |
| Timeline |
| Lincoln Electric Holdings |
| Estee Lauder Companies |
Lincoln Electric and Estee Lauder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Electric and Estee Lauder
The main advantage of trading using opposite Lincoln Electric and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, Estee Lauder 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 Estee Lauder will offset losses from the drop in Estee Lauder's long position.| Lincoln Electric vs. Kennametal | Lincoln Electric vs. Toro Co | Lincoln Electric vs. Snap On | Lincoln Electric vs. RBC Bearings Incorporated |
| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Kimberly Clark |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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