Correlation Between Lincoln National and China Life
Can any of the company-specific risk be diversified away by investing in both Lincoln National and China Life 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 National and China Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lincoln National and China Life Insurance, you can compare the effects of market volatilities on Lincoln National and China Life 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 National with a short position of China Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln National and China Life.
Diversification Opportunities for Lincoln National and China Life
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lincoln and China is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln National and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance and Lincoln National 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 National are associated (or correlated) with China Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of Lincoln National i.e., Lincoln National and China Life go up and down completely randomly.
Pair Corralation between Lincoln National and China Life
Considering the 90-day investment horizon Lincoln National is expected to generate 1.0 times more return on investment than China Life. However, Lincoln National is 1.0 times less risky than China Life. It trades about 0.14 of its potential returns per unit of risk. China Life Insurance is currently generating about -0.11 per unit of risk. If you would invest 3,266 in Lincoln National on August 28, 2024 and sell it today you would earn a total of 305.00 from holding Lincoln National or generate 9.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lincoln National vs. China Life Insurance
Performance |
| Timeline |
| Lincoln National |
| China Life Insurance |
Lincoln National and China Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln National and China Life
The main advantage of trading using opposite Lincoln National and China Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln National position performs unexpectedly, China Life 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 China Life will offset losses from the drop in China Life's long position.| Lincoln National vs. Morningstar Unconstrained Allocation | Lincoln National vs. Via Renewables | Lincoln National vs. Sitka Gold Corp | Lincoln National vs. MSCI ACWI exAUCONSUMER |
| China Life vs. CNO Financial Group | China Life vs. Genworth Financial | China Life vs. MetLife Preferred Stock | China Life vs. Prudential Public Limited |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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