Correlation Between Lloyds Banking and Western Union
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and Western Union 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 Western Union 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 The Western Union, you can compare the effects of market volatilities on Lloyds Banking and Western Union 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 Western Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and Western Union.
Diversification Opportunities for Lloyds Banking and Western Union
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lloyds and Western is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and The Western Union in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union 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 Western Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Union has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Western Union go up and down completely randomly.
Pair Corralation between Lloyds Banking and Western Union
Assuming the 90 days trading horizon Lloyds Banking Group is expected to under-perform the Western Union. In addition to that, Lloyds Banking is 2.16 times more volatile than The Western Union. It trades about -0.1 of its total potential returns per unit of risk. The Western Union is currently generating about 0.28 per unit of volatility. If you would invest 6,200 in The Western Union on September 2, 2024 and sell it today you would earn a total of 244.00 from holding The Western Union or generate 3.94% 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. The Western Union
Performance |
| Timeline |
| Lloyds Banking Group |
| Western Union |
Lloyds Banking and Western Union Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and Western Union
The main advantage of trading using opposite Lloyds Banking and Western Union positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, Western Union 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 Western Union will offset losses from the drop in Western Union's long position.| Lloyds Banking vs. Marvell Technology | Lloyds Banking vs. Apartment Investment and | Lloyds Banking vs. Unity Software | Lloyds Banking vs. Micron Technology |
| Western Union vs. Lloyds Banking Group | Western Union vs. MAHLE Metal Leve | Western Union vs. SVB Financial Group | Western Union vs. Align Technology |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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