Correlation Between Lincoln Electric and Stanley Black
Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and Stanley Black 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 Stanley Black 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 Stanley Black Decker, you can compare the effects of market volatilities on Lincoln Electric and Stanley Black 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 Stanley Black. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and Stanley Black.
Diversification Opportunities for Lincoln Electric and Stanley Black
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lincoln and Stanley is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Stanley Black Decker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stanley Black Decker 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 Stanley Black. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stanley Black Decker has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Stanley Black go up and down completely randomly.
Pair Corralation between Lincoln Electric and Stanley Black
Given the investment horizon of 90 days Lincoln Electric Holdings is expected to under-perform the Stanley Black. But the stock apears to be less risky and, when comparing its historical volatility, Lincoln Electric Holdings is 1.14 times less risky than Stanley Black. The stock trades about -0.04 of its potential returns per unit of risk. The Stanley Black Decker is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 8,694 in Stanley Black Decker on August 27, 2024 and sell it today you would earn a total of 231.00 from holding Stanley Black Decker or generate 2.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lincoln Electric Holdings vs. Stanley Black Decker
Performance |
| Timeline |
| Lincoln Electric Holdings |
| Stanley Black Decker |
Lincoln Electric and Stanley Black Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Electric and Stanley Black
The main advantage of trading using opposite Lincoln Electric and Stanley Black positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, Stanley Black 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 Stanley Black will offset losses from the drop in Stanley Black's long position.| Lincoln Electric vs. Kennametal | Lincoln Electric vs. Toro Co | Lincoln Electric vs. Snap On | Lincoln Electric vs. RBC Bearings Incorporated |
| Stanley Black vs. Toro Co | Stanley Black vs. Timken Company | Stanley Black vs. Lincoln Electric Holdings | Stanley Black vs. Kennametal |
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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