Correlation Between AIA Group and Lincoln National

Can any of the company-specific risk be diversified away by investing in both AIA Group 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 AIA Group and Lincoln National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AIA Group Ltd and Lincoln National, you can compare the effects of market volatilities on AIA Group 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 AIA Group with a short position of Lincoln National. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIA Group and Lincoln National.

Diversification Opportunities for AIA Group and Lincoln National

0.04

Correlation Coefficient

AIA Group  Lincoln National

Significant diversification

The 3 months correlation between AIA and Lincoln is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding AIA Group Ltd and Lincoln National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln National and AIA Group 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 AIA Group Ltd 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 AIA Group i.e., AIA Group and Lincoln National go up and down completely randomly.

Pair Corralation between AIA Group and Lincoln National

Assuming the 90 days horizon AIA Group is expected to generate 1.92 times less return on investment than Lincoln National. But when comparing it to its historical volatility, AIA Group Ltd is 1.08 times less risky than Lincoln National. It trades about 0.06 of its potential returns per unit of risk. Lincoln National is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,078  in Lincoln National on December 1, 2024 and sell it today you would earn a total of  822.00  from holding Lincoln National or generate 26.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AIA Group Ltd  vs.  Lincoln National

AIA Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AIA Group Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, AIA Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lincoln National

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln National are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Lincoln National exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AIA Group and Lincoln National

The main advantage of trading using opposite AIA Group and Lincoln National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIA Group 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.

The idea behind AIA Group Ltd and Lincoln National 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.