Correlation Between Lloyds Banking and National Bank
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and National Bank 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 National Bank 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 National Bank of, you can compare the effects of market volatilities on Lloyds Banking and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and National Bank.
Diversification Opportunities for Lloyds Banking and National Bank
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lloyds and National is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and National Bank go up and down completely randomly.
Pair Corralation between Lloyds Banking and National Bank
Considering the 90-day investment horizon Lloyds Banking Group is expected to generate 0.73 times more return on investment than National Bank. However, Lloyds Banking Group is 1.36 times less risky than National Bank. It trades about -0.21 of its potential returns per unit of risk. National Bank of is currently generating about -0.19 per unit of risk. If you would invest 290.00 in Lloyds Banking Group on August 29, 2024 and sell it today you would lose (22.00) from holding Lloyds Banking Group or give up 7.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lloyds Banking Group vs. National Bank of
Performance |
| Timeline |
| Lloyds Banking Group |
| National Bank |
Lloyds Banking and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and National Bank
The main advantage of trading using opposite Lloyds Banking and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, National Bank 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 National Bank will offset losses from the drop in National Bank's long position.| Lloyds Banking vs. Itau Unibanco Banco | Lloyds Banking vs. Grupo Financiero Galicia | Lloyds Banking vs. Banco Macro SA | Lloyds Banking vs. Banco Santander Brasil |
| National Bank vs. Alpha Bank SA | National Bank vs. Eurobank Ergasias SA | National Bank vs. Piraeus Bank SA | National Bank vs. PT Bank Central |
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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