Correlation Between Lloyds Banking and Este Lauder

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

Diversification Opportunities for Lloyds Banking and Este Lauder

0.63

Correlation Coefficient

Lloyds Banking  Este Lauder

Poor diversification

The 3 months correlation between Lloyds and Este is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and The Este Lauder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Este Lauder 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 Este Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Este Lauder has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Este Lauder go up and down completely randomly.

Pair Corralation between Lloyds Banking and Este Lauder

Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 0.58 times more return on investment than Este Lauder. However, Lloyds Banking Group is 1.72 times less risky than Este Lauder. It trades about 0.11 of its potential returns per unit of risk. The Este Lauder is currently generating about -0.02 per unit of risk. If you would invest  945.00  in Lloyds Banking Group on September 17, 2024 and sell it today you would earn a total of  717.00  from holding Lloyds Banking Group or generate 75.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.53%
Values	Daily Returns

Lloyds Banking Group  vs.  The Este Lauder

Lloyds Banking Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Este Lauder

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Este Lauder are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Este Lauder may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lloyds Banking and Este Lauder

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

The idea behind Lloyds Banking Group and The Este Lauder 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.