Correlation Between Lloyds Banking and Halliburton

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

Diversification Opportunities for Lloyds Banking and Halliburton

-0.64

Correlation Coefficient

Lloyds Banking  Halliburton

Excellent diversification

The 3 months correlation between Lloyds and Halliburton is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Halliburton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halliburton 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 Halliburton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halliburton has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Halliburton go up and down completely randomly.

Pair Corralation between Lloyds Banking and Halliburton

Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 2.05 times more return on investment than Halliburton. However, Lloyds Banking is 2.05 times more volatile than Halliburton. It trades about 0.18 of its potential returns per unit of risk. Halliburton is currently generating about -0.03 per unit of risk. If you would invest  4,950  in Lloyds Banking Group on December 24, 2024 and sell it today you would earn a total of  2,650  from holding Lloyds Banking Group or generate 53.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Lloyds Banking Group  vs.  Halliburton

Lloyds Banking Group

Risk-Adjusted Performance

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 fairly weak basic indicators, Lloyds Banking showed solid returns over the last few months and may actually be approaching a breakup point.

Halliburton

Risk-Adjusted Performance

Very Weak

Over the last 90 days Halliburton has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Halliburton is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lloyds Banking and Halliburton

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

The idea behind Lloyds Banking Group and Halliburton 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.