Correlation Between Lincoln Electric and Kenon Holdings
Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and Kenon Holdings 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 Kenon Holdings 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 Kenon Holdings, you can compare the effects of market volatilities on Lincoln Electric and Kenon Holdings 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 Kenon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and Kenon Holdings.
Diversification Opportunities for Lincoln Electric and Kenon Holdings
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lincoln and Kenon is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Kenon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenon Holdings 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 Kenon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenon Holdings has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Kenon Holdings go up and down completely randomly.
Pair Corralation between Lincoln Electric and Kenon Holdings
Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 1.17 times more return on investment than Kenon Holdings. However, Lincoln Electric is 1.17 times more volatile than Kenon Holdings. It trades about 0.2 of its potential returns per unit of risk. Kenon Holdings is currently generating about 0.2 per unit of risk. If you would invest 19,880 in Lincoln Electric Holdings on September 4, 2024 and sell it today you would earn a total of 1,874 from holding Lincoln Electric Holdings or generate 9.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lincoln Electric Holdings vs. Kenon Holdings
Performance |
| Timeline |
| Lincoln Electric Holdings |
| Kenon Holdings |
Lincoln Electric and Kenon Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Electric and Kenon Holdings
The main advantage of trading using opposite Lincoln Electric and Kenon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, Kenon Holdings 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 Kenon Holdings will offset losses from the drop in Kenon Holdings' long position.| Lincoln Electric vs. Kennametal | Lincoln Electric vs. Toro Co | Lincoln Electric vs. Snap On | Lincoln Electric vs. RBC Bearings Incorporated |
| Kenon Holdings vs. Vistra Energy Corp | Kenon Holdings vs. Pampa Energia SA | Kenon Holdings vs. NRG Energy | Kenon Holdings vs. TransAlta Corp |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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