Correlation Between Lloyds Banking and Bank of San

Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and Bank of San 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 Bank of San 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 Bank of San, you can compare the effects of market volatilities on Lloyds Banking and Bank of San 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 Bank of San. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and Bank of San.

Diversification Opportunities for Lloyds Banking and Bank of San

-0.55

Correlation Coefficient

Lloyds Banking  Bank of San

Excellent diversification

The 3 months correlation between Lloyds and Bank is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Bank of San in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of San 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 Bank of San. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of San has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Bank of San go up and down completely randomly.

Pair Corralation between Lloyds Banking and Bank of San

Assuming the 90 days horizon Lloyds Banking Group is expected to under-perform the Bank of San. In addition to that, Lloyds Banking is 3.38 times more volatile than Bank of San. It trades about -0.01 of its total potential returns per unit of risk. Bank of San is currently generating about 0.36 per unit of volatility. If you would invest  3,015  in Bank of San on September 25, 2024 and sell it today you would earn a total of  185.00  from holding Bank of San or generate 6.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Lloyds Banking Group  vs.  Bank of San

Lloyds Banking Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lloyds Banking Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Bank of San

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of San are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Bank of San may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lloyds Banking and Bank of San

The main advantage of trading using opposite Lloyds Banking and Bank of San positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, Bank of San 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 Bank of San will offset losses from the drop in Bank of San's long position.

The idea behind Lloyds Banking Group and Bank of San 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.