Correlation Between Lincoln Electric and Siriuspoint

Can any of the company-specific risk be diversified away by investing in both Lincoln Electric and Siriuspoint 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 Siriuspoint 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 Siriuspoint, you can compare the effects of market volatilities on Lincoln Electric and Siriuspoint 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 Siriuspoint. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Electric and Siriuspoint.

Diversification Opportunities for Lincoln Electric and Siriuspoint

0.58

Correlation Coefficient

Lincoln Electric  Siriuspoint

Very weak diversification

The 3 months correlation between Lincoln and Siriuspoint is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Electric Holdings and Siriuspoint in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siriuspoint 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 Siriuspoint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siriuspoint has no effect on the direction of Lincoln Electric i.e., Lincoln Electric and Siriuspoint go up and down completely randomly.

Pair Corralation between Lincoln Electric and Siriuspoint

Given the investment horizon of 90 days Lincoln Electric Holdings is expected to generate 0.9 times more return on investment than Siriuspoint. However, Lincoln Electric Holdings is 1.12 times less risky than Siriuspoint. It trades about 0.16 of its potential returns per unit of risk. Siriuspoint is currently generating about 0.1 per unit of risk. If you would invest  17,593  in Lincoln Electric Holdings on September 12, 2024 and sell it today you would earn a total of  3,361  from holding Lincoln Electric Holdings or generate 19.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Lincoln Electric Holdings  vs.  Siriuspoint

Lincoln Electric Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Electric Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Lincoln Electric displayed solid returns over the last few months and may actually be approaching a breakup point.

Siriuspoint

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Siriuspoint are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Siriuspoint unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lincoln Electric and Siriuspoint

The main advantage of trading using opposite Lincoln Electric and Siriuspoint positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Electric position performs unexpectedly, Siriuspoint 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 Siriuspoint will offset losses from the drop in Siriuspoint's long position.

The idea behind Lincoln Electric Holdings and Siriuspoint pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.