Correlation Between LLOYDS METALS and Power Finance

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

Diversification Opportunities for LLOYDS METALS and Power Finance

-0.72

Correlation Coefficient

LLOYDS METALS  Power Finance

Pay attention - limited upside

The 3 months correlation between LLOYDS and Power is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding LLOYDS METALS AND and Power Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Finance 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 Power Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Finance has no effect on the direction of LLOYDS METALS i.e., LLOYDS METALS and Power Finance go up and down completely randomly.

Pair Corralation between LLOYDS METALS and Power Finance

Assuming the 90 days trading horizon LLOYDS METALS AND is expected to generate 0.99 times more return on investment than Power Finance. However, LLOYDS METALS AND is 1.01 times less risky than Power Finance. It trades about 0.2 of its potential returns per unit of risk. Power Finance is currently generating about -0.05 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	98.41%
Values	Daily Returns

LLOYDS METALS AND  vs.  Power Finance

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.

Power Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with LLOYDS METALS and Power Finance

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

The idea behind LLOYDS METALS AND and Power Finance 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.