Correlation Between Lincoln National and Prudential PLC
Can any of the company-specific risk be diversified away by investing in both Lincoln National and Prudential PLC 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 PLC 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 PLC ADR, you can compare the effects of market volatilities on Lincoln National and Prudential PLC 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 PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln National and Prudential PLC.
Diversification Opportunities for Lincoln National and Prudential PLC
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lincoln and Prudential is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln National and Prudential PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential PLC ADR 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 PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential PLC ADR has no effect on the direction of Lincoln National i.e., Lincoln National and Prudential PLC go up and down completely randomly.
Pair Corralation between Lincoln National and Prudential PLC
Considering the 90-day investment horizon Lincoln National is expected to generate 0.84 times more return on investment than Prudential PLC. However, Lincoln National is 1.19 times less risky than Prudential PLC. It trades about 0.36 of its potential returns per unit of risk. Prudential PLC ADR is currently generating about 0.15 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 | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Lincoln National vs. Prudential PLC ADR
Performance |
| Timeline |
| Lincoln National |
| Prudential PLC ADR |
Lincoln National and Prudential PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln National and Prudential PLC
The main advantage of trading using opposite Lincoln National and Prudential PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln National position performs unexpectedly, Prudential PLC 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 PLC will offset losses from the drop in Prudential PLC's long position.| Lincoln National vs. MetLife | Lincoln National vs. Aflac Incorporated | Lincoln National vs. Unum Group | Lincoln National vs. Manulife Financial Corp |
| Prudential PLC vs. CNO Financial Group | Prudential PLC vs. Jackson Financial | Prudential PLC vs. MetLife Preferred Stock | Prudential PLC vs. Jackson Financial |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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