Correlation Between MetLife and Lincoln National
Can any of the company-specific risk be diversified away by investing in both MetLife and Lincoln National 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 MetLife and Lincoln National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MetLife and Lincoln National, you can compare the effects of market volatilities on MetLife and Lincoln National 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 MetLife with a short position of Lincoln National. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife and Lincoln National.
Diversification Opportunities for MetLife and Lincoln National
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MetLife and Lincoln is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Lincoln National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln National and MetLife 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 MetLife are associated (or correlated) with Lincoln National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln National has no effect on the direction of MetLife i.e., MetLife and Lincoln National go up and down completely randomly.
Pair Corralation between MetLife and Lincoln National
Considering the 90-day investment horizon MetLife is expected to generate 1.7 times less return on investment than Lincoln National. But when comparing it to its historical volatility, MetLife is 1.56 times less risky than Lincoln National. It trades about 0.11 of its potential returns per unit of risk. Lincoln National is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,266 in Lincoln National on August 27, 2024 and sell it today you would earn a total of 268.00 from holding Lincoln National or generate 8.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MetLife vs. Lincoln National
Performance |
| Timeline |
| MetLife |
| Lincoln National |
MetLife and Lincoln National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MetLife and Lincoln National
The main advantage of trading using opposite MetLife and Lincoln National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife position performs unexpectedly, Lincoln National 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 National will offset losses from the drop in Lincoln National's long position.| MetLife vs. Morningstar Unconstrained Allocation | MetLife vs. Via Renewables | MetLife vs. Sitka Gold Corp | MetLife vs. MSCI ACWI exAUCONSUMER |
| Lincoln National vs. Morningstar Unconstrained Allocation | Lincoln National vs. Via Renewables | Lincoln National vs. Sitka Gold Corp | Lincoln National vs. MSCI ACWI exAUCONSUMER |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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