Correlation Between Lincoln Electric and Suburban Propane
Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and Suburban Propane 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 Suburban Propane 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 Suburban Propane Partners, you can compare the effects of market volatilities on Lincoln Electric and Suburban Propane 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 Suburban Propane. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and Suburban Propane.
Diversification Opportunities for Lincoln Electric and Suburban Propane
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lincoln and Suburban is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Suburban Propane Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suburban Propane Partners 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 Suburban Propane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suburban Propane Partners has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Suburban Propane go up and down completely randomly.
Pair Corralation between Lincoln Electric and Suburban Propane
Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 1.0 times more return on investment than Suburban Propane. However, Lincoln Electric is 1.0 times more volatile than Suburban Propane Partners. It trades about 0.15 of its potential returns per unit of risk. Suburban Propane Partners is currently generating about 0.1 per unit of risk. If you would invest 19,202 in Lincoln Electric Holdings on August 29, 2024 and sell it today you would earn a total of 2,412 from holding Lincoln Electric Holdings or generate 12.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Lincoln Electric Holdings vs. Suburban Propane Partners
Performance |
| Timeline |
| Lincoln Electric Holdings |
| Suburban Propane Partners |
Lincoln Electric and Suburban Propane Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Electric and Suburban Propane
The main advantage of trading using opposite Lincoln Electric and Suburban Propane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, Suburban Propane 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 Suburban Propane will offset losses from the drop in Suburban Propane's long position.| Lincoln Electric vs. Kennametal | Lincoln Electric vs. Toro Co | Lincoln Electric vs. Snap On | Lincoln Electric vs. RBC Bearings Incorporated |
| Suburban Propane vs. Northwest Natural Gas | Suburban Propane vs. NewJersey Resources | Suburban Propane vs. Atmos Energy | Suburban Propane vs. Chesapeake Utilities |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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