Correlation Between Computer Age and LLOYDS METALS

Can any of the company-specific risk be diversified away by investing in both Computer Age and LLOYDS METALS 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 Computer Age and LLOYDS METALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Computer Age Management and LLOYDS METALS AND, you can compare the effects of market volatilities on Computer Age and LLOYDS METALS 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 Computer Age with a short position of LLOYDS METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computer Age and LLOYDS METALS.

Diversification Opportunities for Computer Age and LLOYDS METALS

0.8

Correlation Coefficient

Computer Age  LLOYDS METALS

Very poor diversification

The 3 months correlation between Computer and LLOYDS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Computer Age Management and LLOYDS METALS AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LLOYDS METALS AND and Computer Age 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 Computer Age Management are associated (or correlated) with LLOYDS METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LLOYDS METALS AND has no effect on the direction of Computer Age i.e., Computer Age and LLOYDS METALS go up and down completely randomly.

Pair Corralation between Computer Age and LLOYDS METALS

Assuming the 90 days trading horizon Computer Age is expected to generate 2.02 times less return on investment than LLOYDS METALS. But when comparing it to its historical volatility, Computer Age Management is 1.21 times less risky than LLOYDS METALS. It trades about 0.25 of its potential returns per unit of risk. LLOYDS METALS AND is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  91,320  in LLOYDS METALS AND on September 23, 2024 and sell it today you would earn a total of  22,180  from holding LLOYDS METALS AND or generate 24.29% return on investment over 90 days.

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

Computer Age Management  vs.  LLOYDS METALS AND

Computer Age Management

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Computer Age Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Computer Age may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LLOYDS METALS AND

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LLOYDS METALS AND are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, LLOYDS METALS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Computer Age and LLOYDS METALS

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

The idea behind Computer Age Management and LLOYDS METALS AND 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.