Correlation Between Lloyds Banking and Teb Bancorp

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

Diversification Opportunities for Lloyds Banking and Teb Bancorp

-0.18

Correlation Coefficient

Lloyds Banking  Teb Bancorp

Good diversification

The 3 months correlation between Lloyds and Teb is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Teb Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teb Bancorp 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 Teb Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teb Bancorp has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Teb Bancorp go up and down completely randomly.

Pair Corralation between Lloyds Banking and Teb Bancorp

Assuming the 90 days horizon Lloyds Banking is expected to generate 4.24 times less return on investment than Teb Bancorp. But when comparing it to its historical volatility, Lloyds Banking Group is 1.43 times less risky than Teb Bancorp. It trades about 0.01 of its potential returns per unit of risk. Teb Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  799.00  in Teb Bancorp on September 23, 2024 and sell it today you would lose (1.00) from holding Teb Bancorp or give up 0.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.43%
Values	Daily Returns

Lloyds Banking Group  vs.  Teb Bancorp

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 unsteady 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.

Teb Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Teb Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Teb Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lloyds Banking and Teb Bancorp

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

The idea behind Lloyds Banking Group and Teb Bancorp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.