Correlation Between Life Science and Lloyds Banking

Can any of the company-specific risk be diversified away by investing in both Life Science 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 Life Science and Lloyds Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Life Science REIT and Lloyds Banking Group, you can compare the effects of market volatilities on Life Science 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 Life Science with a short position of Lloyds Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Science and Lloyds Banking.

Diversification Opportunities for Life Science and Lloyds Banking

-0.5

Correlation Coefficient

Life Science  Lloyds Banking

Very good diversification

The 3 months correlation between Life and Lloyds is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Life Science REIT 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 Life Science 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 Life Science REIT 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 Life Science i.e., Life Science and Lloyds Banking go up and down completely randomly.

Pair Corralation between Life Science and Lloyds Banking

Assuming the 90 days trading horizon Life Science REIT is expected to under-perform the Lloyds Banking. In addition to that, Life Science is 4.06 times more volatile than Lloyds Banking Group. It trades about -0.04 of its total potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.07 per unit of volatility. If you would invest  12,353  in Lloyds Banking Group on September 27, 2024 and sell it today you would earn a total of  1,922  from holding Lloyds Banking Group or generate 15.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Life Science REIT  vs.  Lloyds Banking Group

Life Science REIT

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Life Science REIT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Life Science may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lloyds Banking Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lloyds Banking Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Lloyds Banking is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Life Science and Lloyds Banking

The main advantage of trading using opposite Life Science and Lloyds Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Science 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.

The idea behind Life Science REIT and Lloyds Banking Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.