Correlation Between Lincoln National and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Lincoln National and Prudential Financial 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 Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lincoln National and Prudential Financial, you can compare the effects of market volatilities on Lincoln National and Prudential Financial 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln National and Prudential Financial.
Diversification Opportunities for Lincoln National and Prudential Financial
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lincoln and Prudential is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln National and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Lincoln National i.e., Lincoln National and Prudential Financial go up and down completely randomly.
Pair Corralation between Lincoln National and Prudential Financial
Considering the 90-day investment horizon Lincoln National is expected to generate 1.16 times more return on investment than Prudential Financial. However, Lincoln National is 1.16 times more volatile than Prudential Financial. It trades about 0.36 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.08 per unit of risk. If you would invest 3,136 in Lincoln National on November 3, 2024 and sell it today you would earn a total of 390.87 from holding Lincoln National or generate 12.46% 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. Prudential Financial
Performance |
| Timeline |
| Lincoln National |
| Prudential Financial |
Lincoln National and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln National and Prudential Financial
The main advantage of trading using opposite Lincoln National and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln National position performs unexpectedly, Prudential Financial 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.| Lincoln National vs. MetLife | Lincoln National vs. Aflac Incorporated | Lincoln National vs. Unum Group | Lincoln National vs. Manulife Financial Corp |
| Prudential Financial vs. Lincoln National | Prudential Financial vs. Aflac Incorporated | Prudential Financial vs. Brighthouse Financial | Prudential Financial vs. Unum Group |
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 CEOs Directory module to screen CEOs from public companies around the world.
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