Correlation Between Lloyds Banking and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and Prudential 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 Prudential 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 Prudential Financial, you can compare the effects of market volatilities on Lloyds Banking and Prudential 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and Prudential Financial.
Diversification Opportunities for Lloyds Banking and Prudential Financial
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lloyds and Prudential is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Prudential Financial go up and down completely randomly.
Pair Corralation between Lloyds Banking and Prudential Financial
Assuming the 90 days trading horizon Lloyds Banking is expected to generate 1.43 times less return on investment than Prudential Financial. But when comparing it to its historical volatility, Lloyds Banking Group is 3.77 times less risky than Prudential Financial. It trades about 0.16 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8,534 in Prudential Financial on November 28, 2024 and sell it today you would earn a total of 2,551 from holding Prudential Financial or generate 29.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.49% |
| Values | Daily Returns |
Lloyds Banking Group vs. Prudential Financial
Performance |
| Timeline |
| Lloyds Banking Group |
| Prudential Financial |
Lloyds Banking and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and Prudential Financial
The main advantage of trading using opposite Lloyds Banking and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, Prudential 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.| Lloyds Banking vs. National Beverage Corp | Lloyds Banking vs. Fulcrum Metals PLC | Lloyds Banking vs. Molson Coors Beverage | Lloyds Banking vs. GreenX 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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