Correlation Between Rayonier Advanced and Lincoln Electric
Can any of the company-specific risk be diversified away by investing in both Rayonier Advanced 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 Rayonier Advanced and Lincoln Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rayonier Advanced Materials and Lincoln Electric Holdings, you can compare the effects of market volatilities on Rayonier Advanced 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 Rayonier Advanced with a short position of Lincoln Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rayonier Advanced and Lincoln Electric.
Diversification Opportunities for Rayonier Advanced and Lincoln Electric
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rayonier and Lincoln is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Rayonier Advanced Materials 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 Rayonier Advanced 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 Rayonier Advanced Materials 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 Rayonier Advanced i.e., Rayonier Advanced and Lincoln Electric go up and down completely randomly.
Pair Corralation between Rayonier Advanced and Lincoln Electric
Assuming the 90 days horizon Rayonier Advanced Materials is expected to generate 2.69 times more return on investment than Lincoln Electric. However, Rayonier Advanced is 2.69 times more volatile than Lincoln Electric Holdings. It trades about 0.02 of its potential returns per unit of risk. Lincoln Electric Holdings is currently generating about 0.06 per unit of risk. If you would invest 805.00 in Rayonier Advanced Materials on September 12, 2024 and sell it today you would lose (5.00) from holding Rayonier Advanced Materials or give up 0.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Rayonier Advanced Materials vs. Lincoln Electric Holdings
Performance |
| Timeline |
| Rayonier Advanced |
| Lincoln Electric Holdings |
Rayonier Advanced and Lincoln Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rayonier Advanced and Lincoln Electric
The main advantage of trading using opposite Rayonier Advanced and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rayonier Advanced 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.| Rayonier Advanced vs. AIR LIQUIDE ADR | Rayonier Advanced vs. Shin Etsu Chemical Co | Rayonier Advanced vs. Ganfeng Lithium Co | Rayonier Advanced vs. Superior Plus Corp |
| Lincoln Electric vs. Rayonier Advanced Materials | Lincoln Electric vs. Pembina Pipeline Corp | Lincoln Electric vs. VULCAN MATERIALS | Lincoln Electric vs. Southwest Airlines Co |
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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