Correlation Between Lloyds Banking and Pioneer Bankshares

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

Diversification Opportunities for Lloyds Banking and Pioneer Bankshares

-0.67

Correlation Coefficient

Lloyds Banking  Pioneer Bankshares

Excellent diversification

The 3 months correlation between Lloyds and Pioneer is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Pioneer Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Bankshares 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 Pioneer Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Bankshares has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Pioneer Bankshares go up and down completely randomly.

Pair Corralation between Lloyds Banking and Pioneer Bankshares

Assuming the 90 days horizon Lloyds Banking Group is expected to under-perform the Pioneer Bankshares. In addition to that, Lloyds Banking is 1.68 times more volatile than Pioneer Bankshares. It trades about -0.07 of its total potential returns per unit of risk. Pioneer Bankshares is currently generating about 0.19 per unit of volatility. If you would invest  2,376  in Pioneer Bankshares on September 25, 2024 and sell it today you would earn a total of  324.00  from holding Pioneer Bankshares or generate 13.64% return on investment over 90 days.

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

Lloyds Banking Group  vs.  Pioneer Bankshares

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.

Pioneer Bankshares

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Bankshares are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental drivers, Pioneer Bankshares demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lloyds Banking and Pioneer Bankshares

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

The idea behind Lloyds Banking Group and Pioneer Bankshares 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.