Correlation Between Altice and Lincoln Electric

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

By analyzing existing cross correlation between Altice France 8125 and Lincoln Electric Holdings, you can compare the effects of market volatilities on Altice 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 Altice with a short position of Lincoln Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altice and Lincoln Electric.

Diversification Opportunities for Altice and Lincoln Electric

0.38

Correlation Coefficient

Altice  Lincoln Electric

Weak diversification

The 3 months correlation between Altice and Lincoln is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Altice France 8125 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 Altice 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 Altice France 8125 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 Altice i.e., Altice and Lincoln Electric go up and down completely randomly.

Pair Corralation between Altice and Lincoln Electric

Assuming the 90 days trading horizon Altice is expected to generate 3.33 times less return on investment than Lincoln Electric. But when comparing it to its historical volatility, Altice France 8125 is 1.15 times less risky than Lincoln Electric. It trades about 0.01 of its potential returns per unit of risk. Lincoln Electric Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  18,260  in Lincoln Electric Holdings on September 12, 2024 and sell it today you would earn a total of  2,694  from holding Lincoln Electric Holdings or generate 14.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.54%
Values	Daily Returns

Altice France 8125  vs.  Lincoln Electric Holdings

Altice France 8125

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Altice France 8125 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Altice is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Altice and Lincoln Electric

The main advantage of trading using opposite Altice and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altice 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 Altice France 8125 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.