Correlation Between Lloyds Banking and Dalata Hotel

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

Diversification Opportunities for Lloyds Banking and Dalata Hotel

0.03

Correlation Coefficient

Lloyds Banking  Dalata Hotel

Significant diversification

The 3 months correlation between Lloyds and Dalata is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Dalata Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalata Hotel Group 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 Dalata Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalata Hotel Group has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Dalata Hotel go up and down completely randomly.

Pair Corralation between Lloyds Banking and Dalata Hotel

Assuming the 90 days trading horizon Lloyds Banking Group is expected to under-perform the Dalata Hotel. In addition to that, Lloyds Banking is 1.07 times more volatile than Dalata Hotel Group. It trades about -0.01 of its total potential returns per unit of risk. Dalata Hotel Group is currently generating about 0.15 per unit of volatility. If you would invest  34,000  in Dalata Hotel Group on October 24, 2024 and sell it today you would earn a total of  5,600  from holding Dalata Hotel Group or generate 16.47% return on investment over 90 days.

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

Lloyds Banking Group  vs.  Dalata Hotel Group

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. In spite of comparatively stable basic indicators, Lloyds Banking is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Dalata Hotel Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dalata Hotel Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Dalata Hotel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lloyds Banking and Dalata Hotel

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

The idea behind Lloyds Banking Group and Dalata Hotel Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.