Correlation Between Lloyds Banking and Bank of America
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and Bank of America 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 Lloyds Banking and Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lloyds Banking Group and Bank of America, you can compare the effects of market volatilities on Lloyds Banking and Bank of America 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 Lloyds Banking with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and Bank of America.
Diversification Opportunities for Lloyds Banking and Bank of America
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lloyds and Bank is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America and Lloyds Banking 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 Lloyds Banking Group are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Bank of America go up and down completely randomly.
Pair Corralation between Lloyds Banking and Bank of America
Assuming the 90 days trading horizon Lloyds Banking is expected to generate 1.04 times less return on investment than Bank of America. In addition to that, Lloyds Banking is 1.54 times more volatile than Bank of America. It trades about 0.05 of its total potential returns per unit of risk. Bank of America is currently generating about 0.08 per unit of volatility. If you would invest 4,066 in Bank of America on September 5, 2024 and sell it today you would earn a total of 3,040 from holding Bank of America or generate 74.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Lloyds Banking Group vs. Bank of America
Performance |
| Timeline |
| Lloyds Banking Group |
| Bank of America |
Lloyds Banking and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and Bank of America
The main advantage of trading using opposite Lloyds Banking and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Lloyds Banking vs. Banco Santander Chile | Lloyds Banking vs. Fundo Investimento Imobiliario | Lloyds Banking vs. Fras le SA | Lloyds Banking vs. Western Digital |
| Bank of America vs. Citigroup | Bank of America vs. Fundo Investimento Imobiliario | Bank of America vs. Fras le SA | Bank of America vs. Western Digital |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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