Correlation Between Toro and Lincoln Electric

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

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

Diversification Opportunities for Toro and Lincoln Electric

0.36

Correlation Coefficient

Toro  Lincoln Electric

Weak diversification

The 3 months correlation between Toro and Lincoln is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Toro Co 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 Toro 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 Toro Co 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 Toro i.e., Toro and Lincoln Electric go up and down completely randomly.

Pair Corralation between Toro and Lincoln Electric

Considering the 90-day investment horizon Toro is expected to generate 3.61 times less return on investment than Lincoln Electric. In addition to that, Toro is 1.04 times more volatile than Lincoln Electric Holdings. It trades about 0.07 of its total potential returns per unit of risk. Lincoln Electric Holdings is currently generating about 0.28 per unit of volatility. If you would invest  18,083  in Lincoln Electric Holdings on May 7, 2025 and sell it today you would earn a total of  6,301  from holding Lincoln Electric Holdings or generate 34.84% return on investment over 90 days.

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

Toro Co  vs.  Lincoln Electric Holdings

Toro

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toro Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Toro may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Lincoln Electric Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Electric Holdings are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Lincoln Electric displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toro and Lincoln Electric

The main advantage of trading using opposite Toro and Lincoln Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toro 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 Toro Co 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.