Correlation Between Lloyds Banking and Alphabet

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

Diversification Opportunities for Lloyds Banking and Alphabet

-0.54

Correlation Coefficient

Lloyds Banking  Alphabet

Excellent diversification

The 3 months correlation between Lloyds and Alphabet is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Alphabet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Alphabet go up and down completely randomly.

Pair Corralation between Lloyds Banking and Alphabet

Assuming the 90 days trading horizon Lloyds Banking Group is expected to under-perform the Alphabet. In addition to that, Lloyds Banking is 1.06 times more volatile than Alphabet. It trades about -0.04 of its total potential returns per unit of risk. Alphabet is currently generating about 0.09 per unit of volatility. If you would invest  7,694  in Alphabet on September 1, 2024 and sell it today you would earn a total of  716.00  from holding Alphabet or generate 9.31% return on investment over 90 days.

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

Lloyds Banking Group  vs.  Alphabet

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Alphabet

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Lloyds Banking and Alphabet

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

The idea behind Lloyds Banking Group and Alphabet 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.