Correlation Between Lloyds Banking and Fundo Investimento

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

Diversification Opportunities for Lloyds Banking and Fundo Investimento

0.43

Correlation Coefficient

Lloyds Banking  Fundo Investimento

Very weak diversification

The 3 months correlation between Lloyds and Fundo is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Fundo Investimento Imobiliario in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundo Investimento 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 Fundo Investimento. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundo Investimento has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Fundo Investimento go up and down completely randomly.

Pair Corralation between Lloyds Banking and Fundo Investimento

Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 2.82 times more return on investment than Fundo Investimento. However, Lloyds Banking is 2.82 times more volatile than Fundo Investimento Imobiliario. It trades about -0.01 of its potential returns per unit of risk. Fundo Investimento Imobiliario is currently generating about -0.12 per unit of risk. If you would invest  1,678  in Lloyds Banking Group on September 4, 2024 and sell it today you would lose (40.00) from holding Lloyds Banking Group or give up 2.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Lloyds Banking Group  vs.  Fundo Investimento Imobiliario

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.

Fundo Investimento

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fundo Investimento Imobiliario has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong essential indicators, Fundo Investimento is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lloyds Banking and Fundo Investimento

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

The idea behind Lloyds Banking Group and Fundo Investimento Imobiliario 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.