Correlation Between NI Holdings and Lincoln National

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

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

Diversification Opportunities for NI Holdings and Lincoln National

0.09

Correlation Coefficient

NI Holdings  Lincoln National

Significant diversification

The 3 months correlation between NODK and Lincoln is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and Lincoln National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln National and NI Holdings 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 NI Holdings 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 NI Holdings i.e., NI Holdings and Lincoln National go up and down completely randomly.

Pair Corralation between NI Holdings and Lincoln National

Given the investment horizon of 90 days NI Holdings is expected to under-perform the Lincoln National. In addition to that, NI Holdings is 2.69 times more volatile than Lincoln National. It trades about -0.1 of its total potential returns per unit of risk. Lincoln National is currently generating about 0.0 per unit of volatility. If you would invest  2,704  in Lincoln National on December 21, 2024 and sell it today you would lose (2.00) from holding Lincoln National or give up 0.07% of portfolio value over 90 days.

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

NI Holdings  vs.  Lincoln National

NI Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NI Holdings and Lincoln National

The main advantage of trading using opposite NI Holdings and Lincoln National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NI Holdings 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 NI Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.