Correlation Between Lloyds Banking and Cofina SGPS

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

Diversification Opportunities for Lloyds Banking and Cofina SGPS

-0.29

Correlation Coefficient

Lloyds Banking  Cofina SGPS

Very good diversification

The 3 months correlation between Lloyds and Cofina is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Cofina SGPS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cofina SGPS SA 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 Cofina SGPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cofina SGPS SA has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Cofina SGPS go up and down completely randomly.

Pair Corralation between Lloyds Banking and Cofina SGPS

If you would invest  3,400  in Cofina SGPS SA on October 5, 2024 and sell it today you would lose (720.00) from holding Cofina SGPS SA or give up 21.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Lloyds Banking Group  vs.  Cofina SGPS SA

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 nearly stable fundamental indicators, Lloyds Banking is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Cofina SGPS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cofina SGPS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lloyds Banking and Cofina SGPS

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

The idea behind Lloyds Banking Group and Cofina SGPS SA 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.