Correlation Between Lloyds Banking and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and Discover Financial 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 Discover Financial 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 Discover Financial Services, you can compare the effects of market volatilities on Lloyds Banking and Discover Financial 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 Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and Discover Financial.
Diversification Opportunities for Lloyds Banking and Discover Financial
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lloyds and Discover is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial 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 Discover Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discover Financial has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Discover Financial go up and down completely randomly.
Pair Corralation between Lloyds Banking and Discover Financial
Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 0.16 times more return on investment than Discover Financial. However, Lloyds Banking Group is 6.14 times less risky than Discover Financial. It trades about 0.46 of its potential returns per unit of risk. Discover Financial Services is currently generating about 0.04 per unit of risk. If you would invest 13,915 in Lloyds Banking Group on September 14, 2024 and sell it today you would earn a total of 295.00 from holding Lloyds Banking Group or generate 2.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Lloyds Banking Group vs. Discover Financial Services
Performance |
| Timeline |
| Lloyds Banking Group |
| Discover Financial |
Lloyds Banking and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and Discover Financial
The main advantage of trading using opposite Lloyds Banking and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, Discover Financial 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 Discover Financial will offset losses from the drop in Discover Financial's long position.| Lloyds Banking vs. Liontrust Asset Management | Lloyds Banking vs. Erste Group Bank | Lloyds Banking vs. Smithson Investment Trust | Lloyds Banking vs. Aberdeen Diversified Income |
| Discover Financial vs. Dolly Varden Silver | Discover Financial vs. Ironveld Plc | Discover Financial vs. Baker Steel Resources | Discover Financial vs. Endeavour Mining Corp |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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