Correlation Between Crdit Agricole and Lloyds Banking

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

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

Diversification Opportunities for Crdit Agricole and Lloyds Banking

0.68

Correlation Coefficient

Crdit Agricole  Lloyds Banking

Poor diversification

The 3 months correlation between Crdit and Lloyds is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Crdit Agricole SA 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 Crdit Agricole 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 Crdit Agricole SA 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 Crdit Agricole i.e., Crdit Agricole and Lloyds Banking go up and down completely randomly.

Pair Corralation between Crdit Agricole and Lloyds Banking

Assuming the 90 days horizon Crdit Agricole is expected to generate 2.08 times less return on investment than Lloyds Banking. But when comparing it to its historical volatility, Crdit Agricole SA is 1.46 times less risky than Lloyds Banking. It trades about 0.05 of its potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  48.00  in Lloyds Banking Group on September 23, 2024 and sell it today you would earn a total of  18.00  from holding Lloyds Banking Group or generate 37.5% return on investment over 90 days.

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

Crdit Agricole SA  vs.  Lloyds Banking Group

Crdit Agricole SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crdit Agricole SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Crdit Agricole is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 nearly stable basic indicators, Lloyds Banking is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Crdit Agricole and Lloyds Banking

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

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.