Correlation Between Lincoln Electric and NETGEAR
Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and NETGEAR 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 NETGEAR 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 NETGEAR, you can compare the effects of market volatilities on Lincoln Electric and NETGEAR 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 NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and NETGEAR.
Diversification Opportunities for Lincoln Electric and NETGEAR
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lincoln and NETGEAR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and NETGEAR go up and down completely randomly.
Pair Corralation between Lincoln Electric and NETGEAR
Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 0.56 times more return on investment than NETGEAR. However, Lincoln Electric Holdings is 1.78 times less risky than NETGEAR. It trades about 0.06 of its potential returns per unit of risk. NETGEAR is currently generating about 0.02 per unit of risk. If you would invest 14,244 in Lincoln Electric Holdings on August 24, 2024 and sell it today you would earn a total of 7,108 from holding Lincoln Electric Holdings or generate 49.9% 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. NETGEAR
Performance |
| Timeline |
| Lincoln Electric Holdings |
| NETGEAR |
Lincoln Electric and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Electric and NETGEAR
The main advantage of trading using opposite Lincoln Electric and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, NETGEAR 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 NETGEAR will offset losses from the drop in NETGEAR's long position.| Lincoln Electric vs. Kennametal | Lincoln Electric vs. Toro Co | Lincoln Electric vs. Snap On | Lincoln Electric vs. RBC Bearings Incorporated |
| NETGEAR vs. KVH Industries | NETGEAR vs. Ituran Location and | NETGEAR vs. Aviat Networks | NETGEAR vs. Mynaric AG ADR |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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