Correlation Between Lincoln National and Globe Life

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

By analyzing existing cross correlation between Lincoln National and Globe Life 425, you can compare the effects of market volatilities on Lincoln National and Globe Life 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 Globe Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln National and Globe Life.

Diversification Opportunities for Lincoln National and Globe Life

0.14

Correlation Coefficient

Lincoln National  Globe Life

Average diversification

The 3 months correlation between Lincoln and Globe is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln National and Globe Life 425 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Life 425 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 Globe Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Life 425 has no effect on the direction of Lincoln National i.e., Lincoln National and Globe Life go up and down completely randomly.

Pair Corralation between Lincoln National and Globe Life

Considering the 90-day investment horizon Lincoln National is expected to under-perform the Globe Life. In addition to that, Lincoln National is 2.49 times more volatile than Globe Life 425. It trades about -0.25 of its total potential returns per unit of risk. Globe Life 425 is currently generating about 0.04 per unit of volatility. If you would invest  1,605  in Globe Life 425 on December 10, 2024 and sell it today you would earn a total of  10.00  from holding Globe Life 425 or generate 0.62% return on investment over 90 days.

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

Lincoln National  vs.  Globe Life 425

Lincoln National

Risk-Adjusted Performance

Modest

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 April 2025.

Globe Life 425

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globe Life 425 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Globe Life is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lincoln National and Globe Life

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

The idea behind Lincoln National and Globe Life 425 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.