Correlation Between Sanlam and Lincoln National

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

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

Diversification Opportunities for Sanlam and Lincoln National

0.33

Correlation Coefficient

Sanlam  Lincoln National

Weak diversification

The 3 months correlation between Sanlam and Lincoln is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sanlam Ltd PK and Lincoln National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln National and Sanlam 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 Sanlam Ltd PK 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 Sanlam i.e., Sanlam and Lincoln National go up and down completely randomly.

Pair Corralation between Sanlam and Lincoln National

Assuming the 90 days horizon Sanlam is expected to generate 11.31 times less return on investment than Lincoln National. But when comparing it to its historical volatility, Sanlam Ltd PK is 1.18 times less risky than Lincoln National. It trades about 0.01 of its potential returns per unit of risk. Lincoln National is currently generating about 0.14 of returns per unit of risk over similar time horizon. 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

Sanlam Ltd PK  vs.  Lincoln National

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.

Lincoln National

Risk-Adjusted Performance

Good

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.

Pair Trading with Sanlam and Lincoln National

The main advantage of trading using opposite Sanlam and Lincoln National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sanlam 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 Sanlam Ltd PK 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..