Correlation Between Lloyds Banking and Dell Technologies

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

Diversification Opportunities for Lloyds Banking and Dell Technologies

-0.69

Correlation Coefficient

Lloyds Banking  Dell Technologies

Excellent diversification

The 3 months correlation between Lloyds and Dell is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell Technologies 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 Dell Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dell Technologies has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Dell Technologies go up and down completely randomly.

Pair Corralation between Lloyds Banking and Dell Technologies

Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 0.78 times more return on investment than Dell Technologies. However, Lloyds Banking Group is 1.29 times less risky than Dell Technologies. It trades about 0.18 of its potential returns per unit of risk. Dell Technologies is currently generating about -0.09 per unit of risk. If you would invest  252.00  in Lloyds Banking Group on December 22, 2024 and sell it today you would earn a total of  80.00  from holding Lloyds Banking Group or generate 31.75% return on investment over 90 days.

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

Lloyds Banking Group  vs.  Dell Technologies

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 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Lloyds Banking reported solid returns over the last few months and may actually be approaching a breakup point.

Dell Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dell Technologies 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 fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lloyds Banking and Dell Technologies

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

The idea behind Lloyds Banking Group and Dell Technologies 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.