Correlation Between Rocky Brands and Lincoln Electric

Can any of the company-specific risk be diversified away by investing in both Rocky Brands 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 Rocky Brands and Lincoln Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rocky Brands and Lincoln Electric Holdings, you can compare the effects of market volatilities on Rocky Brands 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 Rocky Brands with a short position of Lincoln Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocky Brands and Lincoln Electric.

Diversification Opportunities for Rocky Brands and Lincoln Electric

-0.83

Correlation Coefficient

Rocky Brands  Lincoln Electric

Pay attention - limited upside

The 3 months correlation between Rocky and Lincoln is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Brands 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 Rocky Brands 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 Rocky Brands 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 Rocky Brands i.e., Rocky Brands and Lincoln Electric go up and down completely randomly.

Pair Corralation between Rocky Brands and Lincoln Electric

Given the investment horizon of 90 days Rocky Brands is expected to generate 1.59 times more return on investment than Lincoln Electric. However, Rocky Brands is 1.59 times more volatile than Lincoln Electric Holdings. It trades about 0.26 of its potential returns per unit of risk. Lincoln Electric Holdings is currently generating about -0.07 per unit of risk. If you would invest  2,076  in Rocky Brands on September 20, 2024 and sell it today you would earn a total of  262.00  from holding Rocky Brands or generate 12.62% return on investment over 90 days.

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

Rocky Brands  vs.  Lincoln Electric Holdings

Rocky Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lincoln Electric Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Electric Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Lincoln Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rocky Brands and Lincoln Electric

The main advantage of trading using opposite Rocky Brands and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Brands 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.

The idea behind Rocky Brands and Lincoln Electric Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.