Correlation Between Lincoln Electric and Park Ohio
Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and Park Ohio 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 Park Ohio 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 Park Ohio Holdings, you can compare the effects of market volatilities on Lincoln Electric and Park Ohio 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 Park Ohio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and Park Ohio.
Diversification Opportunities for Lincoln Electric and Park Ohio
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lincoln and Park is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Park Ohio Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Ohio Holdings 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 Park Ohio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Ohio Holdings has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Park Ohio go up and down completely randomly.
Pair Corralation between Lincoln Electric and Park Ohio
Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 0.67 times more return on investment than Park Ohio. However, Lincoln Electric Holdings is 1.48 times less risky than Park Ohio. It trades about 0.0 of its potential returns per unit of risk. Park Ohio Holdings is currently generating about -0.06 per unit of risk. If you would invest 19,289 in Lincoln Electric Holdings on September 26, 2024 and sell it today you would lose (289.00) from holding Lincoln Electric Holdings or give up 1.5% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Lincoln Electric Holdings vs. Park Ohio Holdings
Performance |
Timeline |
Lincoln Electric Holdings |
Park Ohio Holdings |
Lincoln Electric and Park Ohio Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lincoln Electric and Park Ohio
The main advantage of trading using opposite Lincoln Electric and Park Ohio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, Park Ohio 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 Park Ohio will offset losses from the drop in Park Ohio's long position.Lincoln Electric vs. AMCON Distributing | Lincoln Electric vs. Espey Mfg Electronics | Lincoln Electric vs. Servotronics | Lincoln Electric vs. CompX International |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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