Correlation Between Lloyds Banking and EMERGENT BIOSOLUT

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

Diversification Opportunities for Lloyds Banking and EMERGENT BIOSOLUT

-0.14

Correlation Coefficient

Lloyds Banking  EMERGENT BIOSOLUT

Good diversification

The 3 months correlation between Lloyds and EMERGENT is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and EMERGENT BIOSOLUT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMERGENT BIOSOLUT 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 EMERGENT BIOSOLUT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMERGENT BIOSOLUT has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and EMERGENT BIOSOLUT go up and down completely randomly.

Pair Corralation between Lloyds Banking and EMERGENT BIOSOLUT

Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 0.54 times more return on investment than EMERGENT BIOSOLUT. However, Lloyds Banking Group is 1.85 times less risky than EMERGENT BIOSOLUT. It trades about 0.25 of its potential returns per unit of risk. EMERGENT BIOSOLUT is currently generating about -0.11 per unit of risk. If you would invest  246.00  in Lloyds Banking Group on December 1, 2024 and sell it today you would earn a total of  94.00  from holding Lloyds Banking Group or generate 38.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Lloyds Banking Group  vs.  EMERGENT BIOSOLUT

Lloyds Banking Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lloyds Banking Group are ranked lower than 19 (%) 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.

EMERGENT BIOSOLUT

Risk-Adjusted Performance

Very Weak

Over the last 90 days EMERGENT BIOSOLUT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lloyds Banking and EMERGENT BIOSOLUT

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

The idea behind Lloyds Banking Group and EMERGENT BIOSOLUT 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.