Correlation Between Lloyds Banking and Toyota
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and Toyota 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 Toyota 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 Toyota Motor Corp, you can compare the effects of market volatilities on Lloyds Banking and Toyota 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 Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and Toyota.
Diversification Opportunities for Lloyds Banking and Toyota
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lloyds and Toyota is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Toyota Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor Corp 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 Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor Corp has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Toyota go up and down completely randomly.
Pair Corralation between Lloyds Banking and Toyota
Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 0.3 times more return on investment than Toyota. However, Lloyds Banking Group is 3.37 times less risky than Toyota. It trades about 0.34 of its potential returns per unit of risk. Toyota Motor Corp is currently generating about -0.1 per unit of risk. If you would invest 14,450 in Lloyds Banking Group on December 13, 2024 and sell it today you would earn a total of 375.00 from holding Lloyds Banking Group or generate 2.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lloyds Banking Group vs. Toyota Motor Corp
Performance |
| Timeline |
| Lloyds Banking Group |
| Toyota Motor Corp |
Lloyds Banking and Toyota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and Toyota
The main advantage of trading using opposite Lloyds Banking and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, Toyota 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 Toyota will offset losses from the drop in Toyota's long position.| Lloyds Banking vs. Finnair Oyj | ||
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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