Correlation Between MTU Aero and Lloyds Banking
Can any of the company-specific risk be diversified away by investing in both MTU Aero and Lloyds Banking 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 MTU Aero and Lloyds Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTU Aero Engines and Lloyds Banking Group, you can compare the effects of market volatilities on MTU Aero and Lloyds Banking 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 MTU Aero with a short position of Lloyds Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTU Aero and Lloyds Banking.
Diversification Opportunities for MTU Aero and Lloyds Banking
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MTU and Lloyds is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding MTU Aero Engines and Lloyds Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lloyds Banking Group and MTU Aero 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 MTU Aero Engines are associated (or correlated) with Lloyds Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lloyds Banking Group has no effect on the direction of MTU Aero i.e., MTU Aero and Lloyds Banking go up and down completely randomly.
Pair Corralation between MTU Aero and Lloyds Banking
Assuming the 90 days trading horizon MTU Aero is expected to generate 1.83 times less return on investment than Lloyds Banking. But when comparing it to its historical volatility, MTU Aero Engines is 2.44 times less risky than Lloyds Banking. It trades about 0.23 of its potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 66.00 in Lloyds Banking Group on October 20, 2024 and sell it today you would earn a total of 4.00 from holding Lloyds Banking Group or generate 6.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.44% |
| Values | Daily Returns |
MTU Aero Engines vs. Lloyds Banking Group
Performance |
| Timeline |
| MTU Aero Engines |
| Lloyds Banking Group |
MTU Aero and Lloyds Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTU Aero and Lloyds Banking
The main advantage of trading using opposite MTU Aero and Lloyds Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTU Aero position performs unexpectedly, Lloyds Banking 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 Lloyds Banking will offset losses from the drop in Lloyds Banking's long position.| MTU Aero vs. Raytheon Technologies Corp | MTU Aero vs. The Boeing | MTU Aero vs. Lockheed Martin | MTU Aero vs. The Boeing |
| Lloyds Banking vs. BNP Paribas SA | Lloyds Banking vs. BNP PARIBAS ADR | Lloyds Banking vs. Intesa Sanpaolo SpA | Lloyds Banking vs. Lloyds Banking Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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