Correlation Between Lincoln Electric and Tesla
Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and Tesla 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 Tesla 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 Tesla Inc, you can compare the effects of market volatilities on Lincoln Electric and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and Tesla.
Diversification Opportunities for Lincoln Electric and Tesla
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lincoln and Tesla is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Tesla go up and down completely randomly.
Pair Corralation between Lincoln Electric and Tesla
Given the investment horizon of 90 days Lincoln Electric is expected to generate 3.18 times less return on investment than Tesla. But when comparing it to its historical volatility, Lincoln Electric Holdings is 2.18 times less risky than Tesla. It trades about 0.05 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 11,977 in Tesla Inc on August 31, 2024 and sell it today you would earn a total of 22,539 from holding Tesla Inc or generate 188.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Lincoln Electric Holdings vs. Tesla Inc
Performance |
| Timeline |
| Lincoln Electric Holdings |
| Tesla Inc |
Lincoln Electric and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Electric and Tesla
The main advantage of trading using opposite Lincoln Electric and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.| Lincoln Electric vs. Kennametal | Lincoln Electric vs. Toro Co | Lincoln Electric vs. Snap On | Lincoln Electric vs. RBC Bearings Incorporated |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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