Correlation Between Lincoln Electric and CHARLES

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Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and CHARLES 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 CHARLES 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 CHARLES SCHWAB PORATION, you can compare the effects of market volatilities on Lincoln Electric and CHARLES 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 CHARLES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and CHARLES.

Diversification Opportunities for Lincoln Electric and CHARLES

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between Lincoln and CHARLES is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and CHARLES SCHWAB PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHARLES SCHWAB PORATION 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 CHARLES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHARLES SCHWAB PORATION has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and CHARLES go up and down completely randomly.

Pair Corralation between Lincoln Electric and CHARLES

Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 1.8 times more return on investment than CHARLES. However, Lincoln Electric is 1.8 times more volatile than CHARLES SCHWAB PORATION. It trades about 0.15 of its potential returns per unit of risk. CHARLES SCHWAB PORATION is currently generating about -0.15 per unit of risk. If you would invest  19,202  in Lincoln Electric Holdings on August 31, 2024 and sell it today you would earn a total of  2,460  from holding Lincoln Electric Holdings or generate 12.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

Lincoln Electric Holdings  vs.  CHARLES SCHWAB PORATION

 Performance 
       Timeline  
Lincoln Electric Holdings 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Electric Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Lincoln Electric displayed solid returns over the last few months and may actually be approaching a breakup point.
CHARLES SCHWAB PORATION 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CHARLES SCHWAB PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CHARLES is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lincoln Electric and CHARLES Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lincoln Electric and CHARLES

The main advantage of trading using opposite Lincoln Electric and CHARLES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, CHARLES 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 CHARLES will offset losses from the drop in CHARLES's long position.
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The idea behind Lincoln Electric Holdings and CHARLES SCHWAB PORATION pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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