Correlation Between Old Republic and Lincoln National

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

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

Diversification Opportunities for Old Republic and Lincoln National

0.12

Correlation Coefficient

Old Republic  Lincoln National

Average diversification

The 3 months correlation between Old and Lincoln is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International and Lincoln National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln National and Old Republic 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 Old Republic International 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 Old Republic i.e., Old Republic and Lincoln National go up and down completely randomly.

Pair Corralation between Old Republic and Lincoln National

Considering the 90-day investment horizon Old Republic International is expected to generate 2.09 times more return on investment than Lincoln National. However, Old Republic is 2.09 times more volatile than Lincoln National. It trades about 0.11 of its potential returns per unit of risk. Lincoln National is currently generating about -0.03 per unit of risk. If you would invest  3,276  in Old Republic International on October 24, 2024 and sell it today you would earn a total of  298.00  from holding Old Republic International or generate 9.1% return on investment over 90 days.

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

Old Republic International  vs.  Lincoln National

Old Republic Interna

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Old Republic may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lincoln National

Risk-Adjusted Performance

0 of 100

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

Pair Trading with Old Republic and Lincoln National

The main advantage of trading using opposite Old Republic and Lincoln National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Republic 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 Old Republic International 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.