Correlation Between Lloyds Banking and National Bank
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and National Bank 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 National Bank 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 National Bank Holdings, you can compare the effects of market volatilities on Lloyds Banking and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and National Bank.
Diversification Opportunities for Lloyds Banking and National Bank
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lloyds and National is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and National Bank go up and down completely randomly.
Pair Corralation between Lloyds Banking and National Bank
Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 0.95 times more return on investment than National Bank. However, Lloyds Banking Group is 1.05 times less risky than National Bank. It trades about 0.04 of its potential returns per unit of risk. National Bank Holdings is currently generating about 0.02 per unit of risk. If you would invest 184.00 in Lloyds Banking Group on September 3, 2024 and sell it today you would earn a total of 64.00 from holding Lloyds Banking Group or generate 34.78% 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. National Bank Holdings
Performance |
| Timeline |
| Lloyds Banking Group |
| National Bank Holdings |
Lloyds Banking and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and National Bank
The main advantage of trading using opposite Lloyds Banking and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, National Bank 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 National Bank will offset losses from the drop in National Bank's 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 |
| National Bank vs. NXP Semiconductors NV | National Bank vs. ON SEMICONDUCTOR | National Bank vs. Tower One Wireless | National Bank vs. SK TELECOM TDADR |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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