Correlation Between Lincoln Electric and PennantPark Investment
Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and PennantPark Investment 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 PennantPark Investment 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 PennantPark Investment, you can compare the effects of market volatilities on Lincoln Electric and PennantPark Investment 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 PennantPark Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and PennantPark Investment.
Diversification Opportunities for Lincoln Electric and PennantPark Investment
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lincoln and PennantPark is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment 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 PennantPark Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Investment has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and PennantPark Investment go up and down completely randomly.
Pair Corralation between Lincoln Electric and PennantPark Investment
Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 1.74 times more return on investment than PennantPark Investment. However, Lincoln Electric is 1.74 times more volatile than PennantPark Investment. It trades about 0.16 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.05 per unit of risk. If you would invest 17,593 in Lincoln Electric Holdings on September 12, 2024 and sell it today you would earn a total of 3,361 from holding Lincoln Electric Holdings or generate 19.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lincoln Electric Holdings vs. PennantPark Investment
Performance |
| Timeline |
| Lincoln Electric Holdings |
| PennantPark Investment |
Lincoln Electric and PennantPark Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Electric and PennantPark Investment
The main advantage of trading using opposite Lincoln Electric and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, PennantPark Investment 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 PennantPark Investment will offset losses from the drop in PennantPark Investment's long position.| Lincoln Electric vs. Kennametal | Lincoln Electric vs. Toro Co | Lincoln Electric vs. Snap On | Lincoln Electric vs. RBC Bearings Incorporated |
| PennantPark Investment vs. Visa Class A | PennantPark Investment vs. Diamond Hill Investment | PennantPark Investment vs. Distoken Acquisition | PennantPark Investment vs. AllianceBernstein Holding LP |
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 CEOs Directory module to screen CEOs from public companies around the world.
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