Correlation Between Banco De and Lloyds Banking

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Can any of the company-specific risk be diversified away by investing in both Banco De and Lloyds Banking 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 Banco De and Lloyds Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco De Chile and Lloyds Banking Group, you can compare the effects of market volatilities on Banco De and Lloyds Banking 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 Banco De with a short position of Lloyds Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco De and Lloyds Banking.

Diversification Opportunities for Banco De and Lloyds Banking

BancoLloydsDiversified AwayBancoLloydsDiversified Away100%
0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Banco and Lloyds is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Banco De Chile and Lloyds Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lloyds Banking Group and Banco De 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 Banco De Chile are associated (or correlated) with Lloyds Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lloyds Banking Group has no effect on the direction of Banco De i.e., Banco De and Lloyds Banking go up and down completely randomly.

Pair Corralation between Banco De and Lloyds Banking

Considering the 90-day investment horizon Banco De is expected to generate 2.42 times less return on investment than Lloyds Banking. But when comparing it to its historical volatility, Banco De Chile is 1.75 times less risky than Lloyds Banking. It trades about 0.35 of its potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  306.00  in Lloyds Banking Group on November 30, 2024 and sell it today you would earn a total of  63.00  from holding Lloyds Banking Group or generate 20.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Banco De Chile  vs.  Lloyds Banking Group

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -5051015
JavaScript chart by amCharts 3.21.15BCH LYG
       Timeline  
Banco De Chile 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Banco De Chile are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Banco De demonstrated solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb222324252627
Lloyds Banking Group 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Lloyds Banking Group are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Lloyds Banking reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2.62.833.23.43.6

Banco De and Lloyds Banking Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.49-2.61-1.74-0.860.00.931.882.833.77 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15BCH LYG
       Returns  

Pair Trading with Banco De and Lloyds Banking

The main advantage of trading using opposite Banco De and Lloyds Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco De position performs unexpectedly, Lloyds Banking 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 Lloyds Banking will offset losses from the drop in Lloyds Banking's long position.
The idea behind Banco De Chile and Lloyds Banking Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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