Correlation Between Lloyds Banking and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and Smithson Investment 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 Smithson Investment 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 Smithson Investment Trust, you can compare the effects of market volatilities on Lloyds Banking and Smithson Investment 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 Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and Smithson Investment.
Diversification Opportunities for Lloyds Banking and Smithson Investment
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lloyds and Smithson is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust 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 Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Smithson Investment go up and down completely randomly.
Pair Corralation between Lloyds Banking and Smithson Investment
Assuming the 90 days trading horizon Lloyds Banking is expected to generate 4.39 times less return on investment than Smithson Investment. In addition to that, Lloyds Banking is 1.53 times more volatile than Smithson Investment Trust. It trades about 0.03 of its total potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.21 per unit of volatility. If you would invest 146,400 in Smithson Investment Trust on September 13, 2024 and sell it today you would earn a total of 5,200 from holding Smithson Investment Trust or generate 3.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lloyds Banking Group vs. Smithson Investment Trust
Performance |
| Timeline |
| Lloyds Banking Group |
| Smithson Investment Trust |
Lloyds Banking and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and Smithson Investment
The main advantage of trading using opposite Lloyds Banking and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.| Lloyds Banking vs. Zoom Video Communications | Lloyds Banking vs. Global Net Lease | Lloyds Banking vs. bet at home AG | Lloyds Banking vs. Zegona Communications Plc |
| Smithson Investment vs. Ecclesiastical Insurance Office | Smithson Investment vs. Jacquet Metal Service | Smithson Investment vs. Dalata Hotel Group | Smithson Investment vs. Central Asia Metals |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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