Correlation Between Lloyds Banking and Phillips
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and Phillips 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 Phillips 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 Phillips 66, you can compare the effects of market volatilities on Lloyds Banking and Phillips 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 Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and Phillips.
Diversification Opportunities for Lloyds Banking and Phillips
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lloyds and Phillips is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 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 Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Phillips go up and down completely randomly.
Pair Corralation between Lloyds Banking and Phillips
Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 1.18 times more return on investment than Phillips. However, Lloyds Banking is 1.18 times more volatile than Phillips 66. It trades about 0.03 of its potential returns per unit of risk. Phillips 66 is currently generating about -0.46 per unit of risk. If you would invest 1,658 in Lloyds Banking Group on October 10, 2024 and sell it today you would earn a total of 11.00 from holding Lloyds Banking Group or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lloyds Banking Group vs. Phillips 66
Performance |
| Timeline |
| Lloyds Banking Group |
| Phillips 66 |
Lloyds Banking and Phillips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and Phillips
The main advantage of trading using opposite Lloyds Banking and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, Phillips 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 Phillips will offset losses from the drop in Phillips' long position.| Lloyds Banking vs. Omega Healthcare Investors, | Lloyds Banking vs. JB Hunt Transport | Lloyds Banking vs. Applied Materials, | Lloyds Banking vs. MP Materials Corp |
| Phillips vs. Verizon Communications | Phillips vs. SK Telecom Co, | Phillips vs. STAG Industrial, | Phillips vs. Metalrgica Riosulense SA |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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