Correlation Between Midwest Holding and Lincoln National

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

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

Diversification Opportunities for Midwest Holding and Lincoln National

0.53

Correlation Coefficient

Midwest Holding  Lincoln National

Very weak diversification

The 3 months correlation between Midwest and Lincoln is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Midwest Holding and Lincoln National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln National and Midwest Holding 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 Midwest Holding 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 Midwest Holding i.e., Midwest Holding and Lincoln National go up and down completely randomly.

Pair Corralation between Midwest Holding and Lincoln National

If you would invest  3,107  in Lincoln National on September 30, 2024 and sell it today you would earn a total of  76.00  from holding Lincoln National or generate 2.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Midwest Holding  vs.  Lincoln National

Midwest Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Midwest Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Midwest Holding is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Lincoln National

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln National are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lincoln National is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Midwest Holding and Lincoln National

The main advantage of trading using opposite Midwest Holding and Lincoln National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midwest Holding 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 Midwest Holding 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.