Correlation Between Lincoln Electric and Techtronic Industries
Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and Techtronic Industries 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 Techtronic Industries 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 Techtronic Industries, you can compare the effects of market volatilities on Lincoln Electric and Techtronic Industries 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 Techtronic Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and Techtronic Industries.
Diversification Opportunities for Lincoln Electric and Techtronic Industries
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Lincoln and Techtronic is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Techtronic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techtronic Industries 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 Techtronic Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techtronic Industries has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Techtronic Industries go up and down completely randomly.
Pair Corralation between Lincoln Electric and Techtronic Industries
Assuming the 90 days horizon Lincoln Electric is expected to generate 1.59 times less return on investment than Techtronic Industries. But when comparing it to its historical volatility, Lincoln Electric Holdings is 1.7 times less risky than Techtronic Industries. It trades about 0.06 of its potential returns per unit of risk. Techtronic Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 730.00 in Techtronic Industries on September 14, 2024 and sell it today you would earn a total of 550.00 from holding Techtronic Industries or generate 75.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Lincoln Electric Holdings vs. Techtronic Industries
Performance |
| Timeline |
| Lincoln Electric Holdings |
| Techtronic Industries |
Lincoln Electric and Techtronic Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Electric and Techtronic Industries
The main advantage of trading using opposite Lincoln Electric and Techtronic Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, Techtronic Industries 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 Techtronic Industries will offset losses from the drop in Techtronic Industries' long position.| Lincoln Electric vs. Techtronic Industries | Lincoln Electric vs. Stanley Black Decker | Lincoln Electric vs. Toro Co | Lincoln Electric vs. AB SKF |
| Techtronic Industries vs. Stanley Black Decker | Techtronic Industries vs. Toro Co | Techtronic Industries vs. Lincoln Electric Holdings | Techtronic Industries vs. AB SKF |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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