Correlation Between Lloyds Banking and AvalonBay Communities
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and AvalonBay Communities 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 AvalonBay Communities 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 AvalonBay Communities, you can compare the effects of market volatilities on Lloyds Banking and AvalonBay Communities 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 AvalonBay Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and AvalonBay Communities.
Diversification Opportunities for Lloyds Banking and AvalonBay Communities
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lloyds and AvalonBay is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and AvalonBay Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AvalonBay Communities 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 AvalonBay Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AvalonBay Communities has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and AvalonBay Communities go up and down completely randomly.
Pair Corralation between Lloyds Banking and AvalonBay Communities
Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 0.94 times more return on investment than AvalonBay Communities. However, Lloyds Banking Group is 1.07 times less risky than AvalonBay Communities. It trades about 0.14 of its potential returns per unit of risk. AvalonBay Communities is currently generating about 0.01 per unit of risk. If you would invest 1,601 in Lloyds Banking Group on September 25, 2024 and sell it today you would earn a total of 90.00 from holding Lloyds Banking Group or generate 5.62% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Lloyds Banking Group vs. AvalonBay Communities
Performance |
Timeline |
Lloyds Banking Group |
AvalonBay Communities |
Lloyds Banking and AvalonBay Communities Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lloyds Banking and AvalonBay Communities
The main advantage of trading using opposite Lloyds Banking and AvalonBay Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, AvalonBay Communities 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 AvalonBay Communities will offset losses from the drop in AvalonBay Communities' long position.Lloyds Banking vs. Banco Santander Chile | Lloyds Banking vs. KeyCorp | Lloyds Banking vs. Karsten SA | Lloyds Banking vs. Recrusul SA |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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