Correlation Between Apple and Lloyds Banking

Can any of the company-specific risk be diversified away by investing in both Apple and Lloyds Banking 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 Apple and Lloyds Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Inc and Lloyds Banking Group, you can compare the effects of market volatilities on Apple and Lloyds Banking 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 Apple with a short position of Lloyds Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Lloyds Banking.

Diversification Opportunities for Apple and Lloyds Banking

-0.21

Correlation Coefficient

Apple  Lloyds Banking

Very good diversification

The 3 months correlation between Apple and Lloyds is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Lloyds Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lloyds Banking Group and Apple 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 Apple Inc are associated (or correlated) with Lloyds Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lloyds Banking Group has no effect on the direction of Apple i.e., Apple and Lloyds Banking go up and down completely randomly.

Pair Corralation between Apple and Lloyds Banking

Assuming the 90 days trading horizon Apple Inc is expected to under-perform the Lloyds Banking. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.12 times less risky than Lloyds Banking. The stock trades about -0.05 of its potential returns per unit of risk. The Lloyds Banking Group is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  67.00  in Lloyds Banking Group on December 5, 2024 and sell it today you would earn a total of  23.00  from holding Lloyds Banking Group or generate 34.33% return on investment over 90 days.

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

Apple Inc  vs.  Lloyds Banking Group

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Apple is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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

Pair Trading with Apple and Lloyds Banking

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

The idea behind Apple Inc and Lloyds Banking Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.