Correlation Between Lloyds Banking and GSK Plc
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and GSK Plc 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 GSK Plc 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 GSK plc, you can compare the effects of market volatilities on Lloyds Banking and GSK Plc 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 GSK Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and GSK Plc.
Diversification Opportunities for Lloyds Banking and GSK Plc
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lloyds and GSK is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and GSK plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSK plc 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 GSK Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSK plc has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and GSK Plc go up and down completely randomly.
Pair Corralation between Lloyds Banking and GSK Plc
Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 0.98 times more return on investment than GSK Plc. However, Lloyds Banking Group is 1.02 times less risky than GSK Plc. It trades about 0.09 of its potential returns per unit of risk. GSK plc is currently generating about -0.03 per unit of risk. If you would invest 1,616 in Lloyds Banking Group on September 12, 2024 and sell it today you would earn a total of 50.00 from holding Lloyds Banking Group or generate 3.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lloyds Banking Group vs. GSK plc
Performance |
| Timeline |
| Lloyds Banking Group |
| GSK plc |
Lloyds Banking and GSK Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and GSK Plc
The main advantage of trading using opposite Lloyds Banking and GSK Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, GSK Plc 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 GSK Plc will offset losses from the drop in GSK Plc's long position.| Lloyds Banking vs. Banco Santander Chile | Lloyds Banking vs. Fundo Investimento Imobiliario | Lloyds Banking vs. LESTE FDO INV | Lloyds Banking vs. Fras le SA |
| GSK Plc vs. Mitsubishi UFJ Financial | GSK Plc vs. Ameriprise Financial | GSK Plc vs. Lloyds Banking Group | GSK Plc vs. Waste Management |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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