Correlation Between Lincoln National and Aptiv PLC

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

By analyzing existing cross correlation between Lincoln National and Aptiv PLC, you can compare the effects of market volatilities on Lincoln National and Aptiv PLC 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 Aptiv PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln National and Aptiv PLC.

Diversification Opportunities for Lincoln National and Aptiv PLC

0.16

Correlation Coefficient

Lincoln National  Aptiv PLC

Average diversification

The 3 months correlation between Lincoln and Aptiv is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln National and Aptiv PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptiv PLC 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 Aptiv PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptiv PLC has no effect on the direction of Lincoln National i.e., Lincoln National and Aptiv PLC go up and down completely randomly.

Pair Corralation between Lincoln National and Aptiv PLC

Assuming the 90 days trading horizon Lincoln National is expected to generate 231.75 times less return on investment than Aptiv PLC. But when comparing it to its historical volatility, Lincoln National is 2.51 times less risky than Aptiv PLC. It trades about 0.0 of its potential returns per unit of risk. Aptiv PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,947  in Aptiv PLC on December 21, 2024 and sell it today you would earn a total of  301.00  from holding Aptiv PLC or generate 5.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Lincoln National  vs.  Aptiv PLC

Lincoln National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lincoln National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Lincoln National is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Aptiv PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aptiv PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Aptiv PLC is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Lincoln National and Aptiv PLC

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

The idea behind Lincoln National and Aptiv PLC 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.