Correlation Between Lloyds Banking and Sabre Insurance
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and Sabre Insurance 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 Sabre Insurance 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 Sabre Insurance Group, you can compare the effects of market volatilities on Lloyds Banking and Sabre Insurance 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 Sabre Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and Sabre Insurance.
Diversification Opportunities for Lloyds Banking and Sabre Insurance
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lloyds and Sabre is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Sabre Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabre Insurance Group 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 Sabre Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabre Insurance Group has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Sabre Insurance go up and down completely randomly.
Pair Corralation between Lloyds Banking and Sabre Insurance
Assuming the 90 days trading horizon Lloyds Banking is expected to generate 2.06 times less return on investment than Sabre Insurance. But when comparing it to its historical volatility, Lloyds Banking Group is 3.93 times less risky than Sabre Insurance. It trades about 0.08 of its potential returns per unit of risk. Sabre Insurance Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 9,681 in Sabre Insurance Group on September 2, 2024 and sell it today you would earn a total of 3,439 from holding Sabre Insurance Group or generate 35.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lloyds Banking Group vs. Sabre Insurance Group
Performance |
| Timeline |
| Lloyds Banking Group |
| Sabre Insurance Group |
Lloyds Banking and Sabre Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and Sabre Insurance
The main advantage of trading using opposite Lloyds Banking and Sabre Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, Sabre Insurance 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 Sabre Insurance will offset losses from the drop in Sabre Insurance's long position.| Lloyds Banking vs. British American Tobacco | Lloyds Banking vs. Batm Advanced Communications | Lloyds Banking vs. Regions Financial Corp | Lloyds Banking vs. Sparebank 1 SR |
| Sabre Insurance vs. Berkshire Hathaway | Sabre Insurance vs. Hyundai Motor | Sabre Insurance vs. Samsung Electronics Co | Sabre Insurance vs. Samsung Electronics Co |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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