Correlation Between Lincoln National and Prudential Public

Can any of the company-specific risk be diversified away by investing in both Lincoln National and Prudential Public 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 Public 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 Public Limited, you can compare the effects of market volatilities on Lincoln National and Prudential Public 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 Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln National and Prudential Public.

Diversification Opportunities for Lincoln National and Prudential Public

-0.53

Correlation Coefficient

Lincoln National  Prudential Public

Excellent diversification

The 3 months correlation between Lincoln and Prudential is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln National and Prudential Public Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Public 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 Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Public has no effect on the direction of Lincoln National i.e., Lincoln National and Prudential Public go up and down completely randomly.

Pair Corralation between Lincoln National and Prudential Public

Considering the 90-day investment horizon Lincoln National is expected to under-perform the Prudential Public. In addition to that, Lincoln National is 1.3 times more volatile than Prudential Public Limited. It trades about -0.02 of its total potential returns per unit of risk. Prudential Public Limited is currently generating about -0.01 per unit of volatility. If you would invest  2,334  in Prudential Public Limited on February 5, 2024 and sell it today you would lose (434.00) from holding Prudential Public Limited or give up 18.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lincoln National  vs.  Prudential Public Limited

Lincoln National

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln National are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Lincoln National may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Prudential Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Public Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Prudential Public is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Lincoln National and Prudential Public

The main advantage of trading using opposite Lincoln National and Prudential Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln National position performs unexpectedly, Prudential Public 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 Public will offset losses from the drop in Prudential Public's long position.

The idea behind Lincoln National and Prudential Public Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.