Correlation Between American Equity and Lincoln National
Can any of the company-specific risk be diversified away by investing in both American Equity 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 American Equity and Lincoln National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Equity Investment and Lincoln National, you can compare the effects of market volatilities on American Equity 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 American Equity with a short position of Lincoln National. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Equity and Lincoln National.
Diversification Opportunities for American Equity and Lincoln National
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Lincoln is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding American Equity Investment and Lincoln National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln National and American Equity 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 American Equity Investment 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 American Equity i.e., American Equity and Lincoln National go up and down completely randomly.
Pair Corralation between American Equity and Lincoln National
Considering the 90-day investment horizon American Equity is expected to generate 1.07 times less return on investment than Lincoln National. But when comparing it to its historical volatility, American Equity Investment is 1.59 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 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,974 in Lincoln National on January 19, 2024 and sell it today you would earn a total of 749.00 from holding Lincoln National or generate 37.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Equity Investment vs. Lincoln National
Performance |
| Timeline |
| American Equity Inve |
| Lincoln National |
American Equity and Lincoln National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Equity and Lincoln National
The main advantage of trading using opposite American Equity and Lincoln National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Equity 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.| American Equity vs. MetLife Preferred Stock | American Equity vs. National Western Life | American Equity vs. Prudential Public Limited | American Equity vs. MetLife Preferred Stock |
| 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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