Correlation Between Lloyds Banking and Ametek

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

Diversification Opportunities for Lloyds Banking and Ametek

0.14

Correlation Coefficient

Lloyds Banking  Ametek

Average diversification

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

Pair Corralation between Lloyds Banking and Ametek

Assuming the 90 days trading horizon Lloyds Banking is expected to generate 2.01 times less return on investment than Ametek. But when comparing it to its historical volatility, Lloyds Banking Group is 3.11 times less risky than Ametek. It trades about 0.06 of its potential returns per unit of risk. Ametek Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  14,343  in Ametek Inc on October 4, 2024 and sell it today you would earn a total of  3,733  from holding Ametek Inc or generate 26.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.39%
Values	Daily Returns

Lloyds Banking Group  vs.  Ametek Inc

Lloyds Banking Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lloyds Banking Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. 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.

Ametek Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ametek Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ametek may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lloyds Banking and Ametek

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

The idea behind Lloyds Banking Group and Ametek Inc 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.