Correlation Between Hewlett Packard and Lloyds Banking

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

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

Diversification Opportunities for Hewlett Packard and Lloyds Banking

-0.7

Correlation Coefficient

Hewlett Packard  Lloyds Banking

Excellent diversification

The 3 months correlation between Hewlett and Lloyds is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise 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 Hewlett Packard 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 Hewlett Packard Enterprise 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 Hewlett Packard i.e., Hewlett Packard and Lloyds Banking go up and down completely randomly.

Pair Corralation between Hewlett Packard and Lloyds Banking

Assuming the 90 days trading horizon Hewlett Packard Enterprise is expected to under-perform the Lloyds Banking. In addition to that, Hewlett Packard is 1.5 times more volatile than Lloyds Banking Group. It trades about -0.16 of its total potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.19 per unit of volatility. If you would invest  1,684  in Lloyds Banking Group on December 25, 2024 and sell it today you would earn a total of  499.00  from holding Lloyds Banking Group or generate 29.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.61%
Values	Daily Returns

Hewlett Packard Enterprise  vs.  Lloyds Banking Group

Hewlett Packard Ente

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hewlett Packard Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lloyds Banking Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lloyds Banking Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lloyds Banking sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hewlett Packard and Lloyds Banking

The main advantage of trading using opposite Hewlett Packard and Lloyds Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hewlett Packard 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 Hewlett Packard Enterprise 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .