Correlation Between Dalata Hotel and Lloyds Banking

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

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

Diversification Opportunities for Dalata Hotel and Lloyds Banking

0.71

Correlation Coefficient

Dalata Hotel  Lloyds Banking

Poor diversification

The 3 months correlation between Dalata and Lloyds is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dalata Hotel Group 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 Dalata Hotel 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 Dalata Hotel Group 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 Dalata Hotel i.e., Dalata Hotel and Lloyds Banking go up and down completely randomly.

Pair Corralation between Dalata Hotel and Lloyds Banking

Assuming the 90 days trading horizon Dalata Hotel is expected to generate 1.37 times less return on investment than Lloyds Banking. In addition to that, Dalata Hotel is 1.38 times more volatile than Lloyds Banking Group. It trades about 0.14 of its total potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.27 per unit of volatility. If you would invest  5,422  in Lloyds Banking Group on December 24, 2024 and sell it today you would earn a total of  1,814  from holding Lloyds Banking Group or generate 33.46% return on investment over 90 days.

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

Dalata Hotel Group  vs.  Lloyds Banking Group

Dalata Hotel Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dalata Hotel Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Dalata Hotel exhibited solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of comparatively uncertain basic indicators, Lloyds Banking unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dalata Hotel and Lloyds Banking

The main advantage of trading using opposite Dalata Hotel and Lloyds Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dalata Hotel 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 Dalata Hotel Group 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.