Correlation Between Vodafone Group and Lloyds Banking
Can any of the company-specific risk be diversified away by investing in both Vodafone Group 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 Vodafone Group and Lloyds Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vodafone Group PLC and Lloyds Banking Group, you can compare the effects of market volatilities on Vodafone Group 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 Vodafone Group with a short position of Lloyds Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodafone Group and Lloyds Banking.
Diversification Opportunities for Vodafone Group and Lloyds Banking
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vodafone and Lloyds is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vodafone Group PLC 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 Vodafone Group 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 Vodafone Group PLC 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 Vodafone Group i.e., Vodafone Group and Lloyds Banking go up and down completely randomly.
Pair Corralation between Vodafone Group and Lloyds Banking
Assuming the 90 days trading horizon Vodafone Group PLC is expected to under-perform the Lloyds Banking. In addition to that, Vodafone Group is 1.15 times more volatile than Lloyds Banking Group. It trades about 0.0 of its total potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.05 per unit of volatility. If you would invest 4,201 in Lloyds Banking Group on September 1, 2024 and sell it today you would earn a total of 1,105 from holding Lloyds Banking Group or generate 26.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
Vodafone Group PLC vs. Lloyds Banking Group
Performance |
| Timeline |
| Vodafone Group PLC |
| Lloyds Banking Group |
Vodafone Group and Lloyds Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vodafone Group and Lloyds Banking
The main advantage of trading using opposite Vodafone Group and Lloyds Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodafone Group 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.| Vodafone Group vs. Tungsten West PLC | Vodafone Group vs. Argo Group Limited | Vodafone Group vs. Hardide PLC | Vodafone Group vs. Versarien PLC |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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