Correlation Between Lloyds Banking and Banco Santander

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

Diversification Opportunities for Lloyds Banking and Banco Santander

0.75

Correlation Coefficient

Lloyds Banking  Banco Santander

Poor diversification

The 3 months correlation between Lloyds and Banco is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Banco Santander Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander Brasil 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 Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander Brasil has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Banco Santander go up and down completely randomly.

Pair Corralation between Lloyds Banking and Banco Santander

Considering the 90-day investment horizon Lloyds Banking Group is expected to generate 0.99 times more return on investment than Banco Santander. However, Lloyds Banking Group is 1.01 times less risky than Banco Santander. It trades about 0.29 of its potential returns per unit of risk. Banco Santander Brasil is currently generating about 0.18 per unit of risk. If you would invest  272.00  in Lloyds Banking Group on December 28, 2024 and sell it today you would earn a total of  116.00  from holding Lloyds Banking Group or generate 42.65% return on investment over 90 days.

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

Lloyds Banking Group  vs.  Banco Santander Brasil

Lloyds Banking Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lloyds Banking Group are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Lloyds Banking reported solid returns over the last few months and may actually be approaching a breakup point.

Banco Santander Brasil

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander Brasil are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental drivers, Banco Santander reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lloyds Banking and Banco Santander

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

The idea behind Lloyds Banking Group and Banco Santander Brasil 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.