Correlation Between Lloyds Banking and Capital One
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and Capital One 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 Capital One 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 Capital One Financial, you can compare the effects of market volatilities on Lloyds Banking and Capital One 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 Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and Capital One.
Diversification Opportunities for Lloyds Banking and Capital One
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lloyds and Capital is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Capital One go up and down completely randomly.
Pair Corralation between Lloyds Banking and Capital One
Assuming the 90 days trading horizon Lloyds Banking is expected to generate 183.06 times less return on investment than Capital One. But when comparing it to its historical volatility, Lloyds Banking Group is 1.98 times less risky than Capital One. It trades about 0.0 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 47,114 in Capital One Financial on September 1, 2024 and sell it today you would earn a total of 12,452 from holding Capital One Financial or generate 26.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lloyds Banking Group vs. Capital One Financial
Performance |
| Timeline |
| Lloyds Banking Group |
| Capital One Financial |
Lloyds Banking and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and Capital One
The main advantage of trading using opposite Lloyds Banking and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, Capital One 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 Capital One will offset losses from the drop in Capital One's long position.| Lloyds Banking vs. Fras le SA | Lloyds Banking vs. Western Digital | Lloyds Banking vs. Energisa SA | Lloyds Banking vs. Clave Indices De |
| Capital One vs. Bemobi Mobile Tech | Capital One vs. Zoom Video Communications | Capital One vs. Palantir Technologies | Capital One vs. Dell Technologies |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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