Correlation Between Lloyds Banking and Mercantile Investment
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and Mercantile Investment 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 Mercantile Investment 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 The Mercantile Investment, you can compare the effects of market volatilities on Lloyds Banking and Mercantile Investment 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 Mercantile Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and Mercantile Investment.
Diversification Opportunities for Lloyds Banking and Mercantile Investment
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lloyds and Mercantile is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and The Mercantile Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Mercantile Investment 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 Mercantile Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Mercantile Investment has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Mercantile Investment go up and down completely randomly.
Pair Corralation between Lloyds Banking and Mercantile Investment
Assuming the 90 days trading horizon Lloyds Banking Group is expected to under-perform the Mercantile Investment. In addition to that, Lloyds Banking is 1.52 times more volatile than The Mercantile Investment. It trades about -0.07 of its total potential returns per unit of risk. The Mercantile Investment is currently generating about 0.05 per unit of volatility. If you would invest 23,801 in The Mercantile Investment on September 11, 2024 and sell it today you would earn a total of 649.00 from holding The Mercantile Investment or generate 2.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Lloyds Banking Group vs. The Mercantile Investment
Performance |
Timeline |
Lloyds Banking Group |
The Mercantile Investment |
Lloyds Banking and Mercantile Investment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lloyds Banking and Mercantile Investment
The main advantage of trading using opposite Lloyds Banking and Mercantile Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, Mercantile Investment 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 Mercantile Investment will offset losses from the drop in Mercantile Investment's long position.Lloyds Banking vs. Silvercorp Metals | Lloyds Banking vs. McEwen Mining | Lloyds Banking vs. Thor Mining PLC | Lloyds Banking vs. DFS Furniture 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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