Correlation Between Stanley Black and Lincoln Electric
Can any of the company-specific risk be diversified away by investing in both Stanley Black 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 Stanley Black and Lincoln Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stanley Black Decker and Lincoln Electric Holdings, you can compare the effects of market volatilities on Stanley Black 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 Stanley Black with a short position of Lincoln Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stanley Black and Lincoln Electric.
Diversification Opportunities for Stanley Black and Lincoln Electric
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Stanley and Lincoln is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Stanley Black Decker 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 Stanley Black 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 Stanley Black Decker 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 Stanley Black i.e., Stanley Black and Lincoln Electric go up and down completely randomly.
Pair Corralation between Stanley Black and Lincoln Electric
Considering the 90-day investment horizon Stanley Black Decker is expected to under-perform the Lincoln Electric. In addition to that, Stanley Black is 1.05 times more volatile than Lincoln Electric Holdings. It trades about -0.25 of its total potential returns per unit of risk. Lincoln Electric Holdings is currently generating about 0.18 per unit of volatility. If you would invest 19,584 in Lincoln Electric Holdings on August 27, 2024 and sell it today you would earn a total of 1,768 from holding Lincoln Electric Holdings or generate 9.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stanley Black Decker vs. Lincoln Electric Holdings
Performance |
| Timeline |
| Stanley Black Decker |
| Lincoln Electric Holdings |
Stanley Black and Lincoln Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stanley Black and Lincoln Electric
The main advantage of trading using opposite Stanley Black and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stanley Black 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.| Stanley Black vs. Toro Co | Stanley Black vs. Timken Company | Stanley Black vs. Lincoln Electric Holdings | Stanley Black vs. Kennametal |
| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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