Correlation Between Cisco Systems and Lloyds Banking
Can any of the company-specific risk be diversified away by investing in both Cisco Systems 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 Cisco Systems and Lloyds Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Lloyds Banking Group, you can compare the effects of market volatilities on Cisco Systems 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 Cisco Systems with a short position of Lloyds Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Lloyds Banking.
Diversification Opportunities for Cisco Systems and Lloyds Banking
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cisco and Lloyds is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems 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 Cisco Systems 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 Cisco Systems 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 Cisco Systems i.e., Cisco Systems and Lloyds Banking go up and down completely randomly.
Pair Corralation between Cisco Systems and Lloyds Banking
Given the investment horizon of 90 days Cisco Systems is expected to generate 2.6 times less return on investment than Lloyds Banking. But when comparing it to its historical volatility, Cisco Systems is 3.65 times less risky than Lloyds Banking. It trades about 0.05 of its potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 54.00 in Lloyds Banking Group on September 2, 2024 and sell it today you would earn a total of 12.00 from holding Lloyds Banking Group or generate 22.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 81.18% |
| Values | Daily Returns |
Cisco Systems vs. Lloyds Banking Group
Performance |
| Timeline |
| Cisco Systems |
| Lloyds Banking Group |
Cisco Systems and Lloyds Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Lloyds Banking
The main advantage of trading using opposite Cisco Systems and Lloyds Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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.| Cisco Systems vs. Juniper Networks | Cisco Systems vs. Nokia Corp ADR | Cisco Systems vs. Motorola Solutions | Cisco Systems vs. Ciena Corp |
| Lloyds Banking vs. Piraeus Bank SA | Lloyds Banking vs. Turkiye Garanti Bankasi | Lloyds Banking vs. Uwharrie Capital Corp |
Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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