Correlation Between Lloyds Banking and Bankinter

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

Diversification Opportunities for Lloyds Banking and Bankinter

0.7

Correlation Coefficient

Lloyds Banking  Bankinter

Poor diversification

The 3 months correlation between Lloyds and Bankinter is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Bankinter SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankinter SA ADR 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 Bankinter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bankinter SA ADR has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Bankinter go up and down completely randomly.

Pair Corralation between Lloyds Banking and Bankinter

Assuming the 90 days horizon Lloyds Banking Group is expected to generate 1.85 times more return on investment than Bankinter. However, Lloyds Banking is 1.85 times more volatile than Bankinter SA ADR. It trades about 0.18 of its potential returns per unit of risk. Bankinter SA ADR is currently generating about 0.19 per unit of risk. If you would invest  69.00  in Lloyds Banking Group on November 28, 2024 and sell it today you would earn a total of  23.00  from holding Lloyds Banking Group or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	81.03%
Values	Daily Returns

Lloyds Banking Group  vs.  Bankinter SA ADR

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 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lloyds Banking reported solid returns over the last few months and may actually be approaching a breakup point.

Bankinter SA ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bankinter SA ADR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Bankinter showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lloyds Banking and Bankinter

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

The idea behind Lloyds Banking Group and Bankinter SA ADR 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 Transaction History module to view history of all your transactions and understand their impact on performance.