Correlation Between Lloyds Banking and Compagnie Plastic

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

Diversification Opportunities for Lloyds Banking and Compagnie Plastic

0.73

Correlation Coefficient

Lloyds Banking  Compagnie Plastic

Poor diversification

The 3 months correlation between Lloyds and Compagnie is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Compagnie Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Plastic Omnium 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 Compagnie Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Plastic Omnium has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Compagnie Plastic go up and down completely randomly.

Pair Corralation between Lloyds Banking and Compagnie Plastic

Assuming the 90 days trading horizon Lloyds Banking is expected to generate 9.45 times less return on investment than Compagnie Plastic. But when comparing it to its historical volatility, Lloyds Banking Group is 12.31 times less risky than Compagnie Plastic. It trades about 0.13 of its potential returns per unit of risk. Compagnie Plastic Omnium is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  864.00  in Compagnie Plastic Omnium on October 3, 2024 and sell it today you would earn a total of  134.00  from holding Compagnie Plastic Omnium or generate 15.51% return on investment over 90 days.

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

Lloyds Banking Group  vs.  Compagnie Plastic Omnium

Lloyds Banking Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lloyds Banking Group are ranked lower than 10 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Compagnie Plastic Omnium

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Plastic Omnium are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Compagnie Plastic unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lloyds Banking and Compagnie Plastic

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

The idea behind Lloyds Banking Group and Compagnie Plastic Omnium 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..