Correlation Between Lincoln National and CNO Financial
Can any of the company-specific risk be diversified away by investing in both Lincoln National and CNO 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 CNO 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 CNO Financial Group, you can compare the effects of market volatilities on Lincoln National and CNO 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 CNO Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln National and CNO Financial.
Diversification Opportunities for Lincoln National and CNO Financial
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lincoln and CNO is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln National and CNO Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNO Financial Group 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 CNO Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNO Financial Group has no effect on the direction of Lincoln National i.e., Lincoln National and CNO Financial go up and down completely randomly.
Pair Corralation between Lincoln National and CNO Financial
Considering the 90-day investment horizon Lincoln National is expected to generate 1.65 times more return on investment than CNO Financial. However, Lincoln National is 1.65 times more volatile than CNO Financial Group. It trades about 0.03 of its potential returns per unit of risk. CNO Financial Group is currently generating about 0.03 per unit of risk. If you would invest 2,641 in Lincoln National on January 24, 2024 and sell it today you would earn a total of 185.00 from holding Lincoln National or generate 7.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lincoln National vs. CNO Financial Group
Performance |
| Timeline |
| Lincoln National |
| CNO Financial Group |
Lincoln National and CNO Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln National and CNO Financial
The main advantage of trading using opposite Lincoln National and CNO Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln National position performs unexpectedly, CNO 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 CNO Financial will offset losses from the drop in CNO Financial's long position.The idea behind Lincoln National and CNO Financial Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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