Correlation Between Lincoln Electric and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and IPG Photonics 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 IPG Photonics 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 IPG Photonics, you can compare the effects of market volatilities on Lincoln Electric and IPG Photonics 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 IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and IPG Photonics.
Diversification Opportunities for Lincoln Electric and IPG Photonics
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lincoln and IPG is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics 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 IPG Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPG Photonics has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and IPG Photonics go up and down completely randomly.
Pair Corralation between Lincoln Electric and IPG Photonics
Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 0.87 times more return on investment than IPG Photonics. However, Lincoln Electric Holdings is 1.16 times less risky than IPG Photonics. It trades about 0.24 of its potential returns per unit of risk. IPG Photonics is currently generating about 0.01 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lincoln Electric Holdings vs. IPG Photonics
Performance |
| Timeline |
| Lincoln Electric Holdings |
| IPG Photonics |
Lincoln Electric and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Electric and IPG Photonics
The main advantage of trading using opposite Lincoln Electric and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, IPG Photonics 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 IPG Photonics will offset losses from the drop in IPG Photonics' long position.| Lincoln Electric vs. Kennametal | Lincoln Electric vs. Toro Co | Lincoln Electric vs. Snap On | Lincoln Electric vs. RBC Bearings Incorporated |
| IPG Photonics vs. Teradyne | IPG Photonics vs. Ultra Clean Holdings | IPG Photonics vs. Onto Innovation | IPG Photonics vs. Cohu Inc |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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