Correlation Between Prudential PLC and Lincoln National
Can any of the company-specific risk be diversified away by investing in both Prudential PLC 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 Prudential PLC and Lincoln National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential PLC ADR and Lincoln National, you can compare the effects of market volatilities on Prudential PLC 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 Prudential PLC with a short position of Lincoln National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential PLC and Lincoln National.
Diversification Opportunities for Prudential PLC and Lincoln National
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Prudential and Lincoln is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Prudential PLC ADR and Lincoln National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln National and Prudential PLC 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 Prudential PLC ADR 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 Prudential PLC i.e., Prudential PLC and Lincoln National go up and down completely randomly.
Pair Corralation between Prudential PLC and Lincoln National
Considering the 90-day investment horizon Prudential PLC is expected to generate 2.05 times less return on investment than Lincoln National. In addition to that, Prudential PLC is 1.19 times more volatile than Lincoln National. It trades about 0.15 of its total potential returns per unit of risk. Lincoln National is currently generating about 0.36 per unit of volatility. 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 |
Prudential PLC ADR vs. Lincoln National
Performance |
| Timeline |
| Prudential PLC ADR |
| Lincoln National |
Prudential PLC and Lincoln National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential PLC and Lincoln National
The main advantage of trading using opposite Prudential PLC and Lincoln National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential PLC 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.| Prudential PLC vs. CNO Financial Group | Prudential PLC vs. Jackson Financial | Prudential PLC vs. MetLife Preferred Stock | Prudential PLC vs. Jackson Financial |
| Lincoln National vs. MetLife | Lincoln National vs. Aflac Incorporated | Lincoln National vs. Unum Group | Lincoln National vs. Manulife Financial Corp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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