Correlation Between Lloyds Banking and HSBC Holdings
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and HSBC Holdings 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 HSBC Holdings 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 HSBC Holdings plc, you can compare the effects of market volatilities on Lloyds Banking and HSBC Holdings 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 HSBC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and HSBC Holdings.
Diversification Opportunities for Lloyds Banking and HSBC Holdings
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lloyds and HSBC is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and HSBC Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC Holdings 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 HSBC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC Holdings plc has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and HSBC Holdings go up and down completely randomly.
Pair Corralation between Lloyds Banking and HSBC Holdings
Assuming the 90 days trading horizon Lloyds Banking Group is expected to under-perform the HSBC Holdings. In addition to that, Lloyds Banking is 2.26 times more volatile than HSBC Holdings plc. It trades about 0.0 of its total potential returns per unit of risk. HSBC Holdings plc is currently generating about 0.16 per unit of volatility. If you would invest 808.00 in HSBC Holdings plc on September 3, 2024 and sell it today you would earn a total of 83.00 from holding HSBC Holdings plc or generate 10.27% 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. HSBC Holdings plc
Performance |
| Timeline |
| Lloyds Banking Group |
| HSBC Holdings plc |
Lloyds Banking and HSBC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and HSBC Holdings
The main advantage of trading using opposite Lloyds Banking and HSBC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, HSBC Holdings 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 HSBC Holdings will offset losses from the drop in HSBC Holdings' long position.| Lloyds Banking vs. National Bank Holdings | Lloyds Banking vs. Tradegate AG Wertpapierhandelsbank | Lloyds Banking vs. GUARDANT HEALTH CL | Lloyds Banking vs. National Health Investors |
| HSBC Holdings vs. INTERSHOP Communications Aktiengesellschaft | HSBC Holdings vs. Zijin Mining Group | HSBC Holdings vs. GRIFFIN MINING LTD | HSBC Holdings vs. Computer And 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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