Correlation Between LLOYDS METALS and Global Education

Can any of the company-specific risk be diversified away by investing in both LLOYDS METALS and Global Education 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 METALS and Global Education into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LLOYDS METALS AND and Global Education Limited, you can compare the effects of market volatilities on LLOYDS METALS and Global Education 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 METALS with a short position of Global Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of LLOYDS METALS and Global Education.

Diversification Opportunities for LLOYDS METALS and Global Education

-0.62

Correlation Coefficient

LLOYDS METALS  Global Education

Excellent diversification

The 3 months correlation between LLOYDS and Global is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding LLOYDS METALS AND and Global Education Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Education and LLOYDS METALS 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 METALS AND are associated (or correlated) with Global Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Education has no effect on the direction of LLOYDS METALS i.e., LLOYDS METALS and Global Education go up and down completely randomly.

Pair Corralation between LLOYDS METALS and Global Education

Assuming the 90 days trading horizon LLOYDS METALS AND is expected to generate 0.84 times more return on investment than Global Education. However, LLOYDS METALS AND is 1.18 times less risky than Global Education. It trades about 0.2 of its potential returns per unit of risk. Global Education Limited is currently generating about 0.0 per unit of risk. If you would invest  77,935  in LLOYDS METALS AND on September 4, 2024 and sell it today you would earn a total of  27,090  from holding LLOYDS METALS AND or generate 34.76% return on investment over 90 days.

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

LLOYDS METALS AND  vs.  Global Education Limited

LLOYDS METALS AND

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LLOYDS METALS AND are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, LLOYDS METALS displayed solid returns over the last few months and may actually be approaching a breakup point.

Global Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Education Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Global Education is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LLOYDS METALS and Global Education

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

The idea behind LLOYDS METALS AND and Global Education Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.