Correlation Between Makita Corp and Lincoln Electric
Can any of the company-specific risk be diversified away by investing in both Makita Corp and Lincoln Electric 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 Makita Corp and Lincoln Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Makita Corp and Lincoln Electric Holdings, you can compare the effects of market volatilities on Makita Corp and Lincoln Electric 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 Makita Corp with a short position of Lincoln Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Makita Corp and Lincoln Electric.
Diversification Opportunities for Makita Corp and Lincoln Electric
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Makita and Lincoln is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Makita Corp and Lincoln Electric Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Electric Holdings and Makita Corp 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 Makita Corp are associated (or correlated) with Lincoln Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Electric Holdings has no effect on the direction of Makita Corp i.e., Makita Corp and Lincoln Electric go up and down completely randomly.
Pair Corralation between Makita Corp and Lincoln Electric
If you would invest 19,584 in Lincoln Electric Holdings on August 27, 2024 and sell it today you would earn a total of 2,410 from holding Lincoln Electric Holdings or generate 12.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Makita Corp vs. Lincoln Electric Holdings
Performance |
| Timeline |
| Makita Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Lincoln Electric Holdings |
Makita Corp and Lincoln Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Makita Corp and Lincoln Electric
The main advantage of trading using opposite Makita Corp and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Makita Corp position performs unexpectedly, Lincoln Electric 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 Lincoln Electric will offset losses from the drop in Lincoln Electric's long position.| Makita Corp vs. Snap On | Makita Corp vs. Stanley Black Decker | Makita Corp vs. Eastern Co | Makita Corp vs. Hillman Solutions Corp |
| 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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