Correlation Between Lloyds Banking and Truist Financial

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

Diversification Opportunities for Lloyds Banking and Truist Financial

-0.04

Correlation Coefficient

Lloyds Banking  Truist Financial

Good diversification

The 3 months correlation between Lloyds and Truist is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Truist Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial 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 Truist Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truist Financial has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Truist Financial go up and down completely randomly.

Pair Corralation between Lloyds Banking and Truist Financial

Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 1.18 times more return on investment than Truist Financial. However, Lloyds Banking is 1.18 times more volatile than Truist Financial. It trades about 0.19 of its potential returns per unit of risk. Truist Financial is currently generating about -0.05 per unit of risk. If you would invest  1,684  in Lloyds Banking Group on December 25, 2024 and sell it today you would earn a total of  499.00  from holding Lloyds Banking Group or generate 29.63% return on investment over 90 days.

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

Lloyds Banking Group  vs.  Truist Financial

Lloyds Banking Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lloyds Banking Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lloyds Banking sustained solid returns over the last few months and may actually be approaching a breakup point.

Truist Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Lloyds Banking and Truist Financial

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

The idea behind Lloyds Banking Group and Truist Financial 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.