Correlation Between Lincoln Electric and Snap-on Incorporated
Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and Snap-on Incorporated 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 Snap-on Incorporated 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 Snap on Incorporated, you can compare the effects of market volatilities on Lincoln Electric and Snap-on Incorporated 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 Snap-on Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and Snap-on Incorporated.
Diversification Opportunities for Lincoln Electric and Snap-on Incorporated
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Lincoln and Snap-on is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Snap on Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap-on Incorporated 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 Snap-on Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap-on Incorporated has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Snap-on Incorporated go up and down completely randomly.
Pair Corralation between Lincoln Electric and Snap-on Incorporated
Assuming the 90 days horizon Lincoln Electric is expected to generate 1.74 times less return on investment than Snap-on Incorporated. But when comparing it to its historical volatility, Lincoln Electric Holdings is 1.06 times less risky than Snap-on Incorporated. It trades about 0.22 of its potential returns per unit of risk. Snap on Incorporated is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 25,555 in Snap on Incorporated on August 31, 2024 and sell it today you would earn a total of 9,345 from holding Snap on Incorporated or generate 36.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lincoln Electric Holdings vs. Snap on Incorporated
Performance |
| Timeline |
| Lincoln Electric Holdings |
| Snap-on Incorporated |
Lincoln Electric and Snap-on Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Electric and Snap-on Incorporated
The main advantage of trading using opposite Lincoln Electric and Snap-on Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, Snap-on Incorporated 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 Snap-on Incorporated will offset losses from the drop in Snap-on Incorporated's long position.| Lincoln Electric vs. USWE SPORTS AB | Lincoln Electric vs. BII Railway Transportation | Lincoln Electric vs. Cars Inc | Lincoln Electric vs. GRUPO CARSO A1 |
| Snap-on Incorporated vs. Toro Co | Snap-on Incorporated vs. Lincoln Electric Holdings | Snap-on Incorporated vs. AB SKF | Snap-on Incorporated vs. MISUMI GROUP INC |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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