Correlation Between Lloyds Banking and SupplyMe Capital

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

Diversification Opportunities for Lloyds Banking and SupplyMe Capital

0.31

Correlation Coefficient

Lloyds Banking  SupplyMe Capital

Weak diversification

The 3 months correlation between Lloyds and SupplyMe is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and SupplyMe Capital PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SupplyMe Capital PLC 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 SupplyMe Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SupplyMe Capital PLC has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and SupplyMe Capital go up and down completely randomly.

Pair Corralation between Lloyds Banking and SupplyMe Capital

Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 0.16 times more return on investment than SupplyMe Capital. However, Lloyds Banking Group is 6.12 times less risky than SupplyMe Capital. It trades about 0.04 of its potential returns per unit of risk. SupplyMe Capital PLC is currently generating about -0.03 per unit of risk. If you would invest  4,112  in Lloyds Banking Group on September 1, 2024 and sell it today you would earn a total of  1,194  from holding Lloyds Banking Group or generate 29.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Lloyds Banking Group  vs.  SupplyMe Capital PLC

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SupplyMe Capital PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SupplyMe Capital PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lloyds Banking and SupplyMe Capital

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

The idea behind Lloyds Banking Group and SupplyMe Capital PLC 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.