Correlation Between Supermarket Income and Lloyds Banking

Can any of the company-specific risk be diversified away by investing in both Supermarket Income and Lloyds Banking 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 Supermarket Income and Lloyds Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Supermarket Income REIT and Lloyds Banking Group, you can compare the effects of market volatilities on Supermarket Income and Lloyds Banking 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 Supermarket Income with a short position of Lloyds Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Supermarket Income and Lloyds Banking.

Diversification Opportunities for Supermarket Income and Lloyds Banking

-0.22

Correlation Coefficient

Supermarket Income  Lloyds Banking

Very good diversification

The 3 months correlation between Supermarket and Lloyds is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Supermarket Income REIT and Lloyds Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lloyds Banking Group and Supermarket Income 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 Supermarket Income REIT are associated (or correlated) with Lloyds Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lloyds Banking Group has no effect on the direction of Supermarket Income i.e., Supermarket Income and Lloyds Banking go up and down completely randomly.

Pair Corralation between Supermarket Income and Lloyds Banking

Assuming the 90 days trading horizon Supermarket Income REIT is expected to under-perform the Lloyds Banking. In addition to that, Supermarket Income is 5.69 times more volatile than Lloyds Banking Group. It trades about -0.06 of its total potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.54 per unit of volatility. If you would invest  13,955  in Lloyds Banking Group on September 27, 2024 and sell it today you would earn a total of  320.00  from holding Lloyds Banking Group or generate 2.29% return on investment over 90 days.

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

Supermarket Income REIT  vs.  Lloyds Banking Group

Supermarket Income REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Supermarket Income REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Supermarket Income is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Lloyds Banking Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lloyds Banking Group are ranked lower than 6 (%) 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.

Pair Trading with Supermarket Income and Lloyds Banking

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

The idea behind Supermarket Income REIT and Lloyds Banking Group 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.