Correlation Between Phillips and Lloyds Banking
Can any of the company-specific risk be diversified away by investing in both Phillips 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 Phillips and Lloyds Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Phillips 66 and Lloyds Banking Group, you can compare the effects of market volatilities on Phillips 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 Phillips with a short position of Lloyds Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phillips and Lloyds Banking.
Diversification Opportunities for Phillips and Lloyds Banking
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Phillips and Lloyds is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 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 Phillips 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 Phillips 66 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 Phillips i.e., Phillips and Lloyds Banking go up and down completely randomly.
Pair Corralation between Phillips and Lloyds Banking
Assuming the 90 days trading horizon Phillips is expected to generate 54.08 times less return on investment than Lloyds Banking. But when comparing it to its historical volatility, Phillips 66 is 1.36 times less risky than Lloyds Banking. It trades about 0.0 of its potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,234 in Lloyds Banking Group on October 25, 2024 and sell it today you would earn a total of 541.00 from holding Lloyds Banking Group or generate 43.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.75% |
| Values | Daily Returns |
Phillips 66 vs. Lloyds Banking Group
Performance |
| Timeline |
| Phillips 66 |
| Lloyds Banking Group |
Phillips and Lloyds Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Phillips and Lloyds Banking
The main advantage of trading using opposite Phillips and Lloyds Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phillips 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.| Phillips vs. Cardinal Health, | Phillips vs. Unity Software | Phillips vs. Guidewire Software, | Phillips vs. Spotify Technology SA |
| Lloyds Banking vs. Micron Technology | Lloyds Banking vs. Guidewire Software, | Lloyds Banking vs. Seagate Technology Holdings | Lloyds Banking vs. Zoom Video Communications |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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