Correlation Between Lincoln National and Sanlam

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

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

Diversification Opportunities for Lincoln National and Sanlam

0.33

Correlation Coefficient

Lincoln National  Sanlam

Weak diversification

The 3 months correlation between Lincoln and Sanlam is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln National and Sanlam Ltd PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanlam Ltd PK 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 Sanlam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanlam Ltd PK has no effect on the direction of Lincoln National i.e., Lincoln National and Sanlam go up and down completely randomly.

Pair Corralation between Lincoln National and Sanlam

Considering the 90-day investment horizon Lincoln National is expected to generate 1.18 times more return on investment than Sanlam. However, Lincoln National is 1.18 times more volatile than Sanlam Ltd PK. It trades about 0.14 of its potential returns per unit of risk. Sanlam Ltd PK is currently generating about 0.01 per unit of risk. If you would invest  3,104  in Lincoln National on December 29, 2024 and sell it today you would earn a total of  574.00  from holding Lincoln National or generate 18.49% 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.  Sanlam Ltd PK

Lincoln National

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln National are ranked lower than 11 (%) 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.

Sanlam Ltd PK

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sanlam Ltd PK are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Sanlam is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lincoln National and Sanlam

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

The idea behind Lincoln National and Sanlam Ltd PK 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.