Correlation Between Lloyds Banking and Intesa Sanpaolo

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

Diversification Opportunities for Lloyds Banking and Intesa Sanpaolo

0.93

Correlation Coefficient

Lloyds Banking  Intesa Sanpaolo

Almost no diversification

The 3 months correlation between Lloyds and Intesa is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Intesa Sanpaolo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intesa Sanpaolo SpA 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 Intesa Sanpaolo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intesa Sanpaolo SpA has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Intesa Sanpaolo go up and down completely randomly.

Pair Corralation between Lloyds Banking and Intesa Sanpaolo

Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 1.19 times more return on investment than Intesa Sanpaolo. However, Lloyds Banking is 1.19 times more volatile than Intesa Sanpaolo SpA. It trades about 0.25 of its potential returns per unit of risk. Intesa Sanpaolo SpA is currently generating about 0.25 per unit of risk. If you would invest  230.00  in Lloyds Banking Group on February 22, 2024 and sell it today you would earn a total of  22.00  from holding Lloyds Banking Group or generate 9.57% return on investment over 90 days.

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

Lloyds Banking Group  vs.  Intesa Sanpaolo SpA

Lloyds Banking Group

Risk-Adjusted Performance

13 of 100

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 fundamental indicators, Lloyds Banking reported solid returns over the last few months and may actually be approaching a breakup point.

Intesa Sanpaolo SpA

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Intesa Sanpaolo SpA are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Intesa Sanpaolo reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lloyds Banking and Intesa Sanpaolo

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

The idea behind Lloyds Banking Group and Intesa Sanpaolo SpA 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.