Correlation Between Disney and LLOYDS

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

By analyzing existing cross correlation between Walt Disney and LLOYDS BANKING GROUP, you can compare the effects of market volatilities on Disney and LLOYDS 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 Disney with a short position of LLOYDS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and LLOYDS.

Diversification Opportunities for Disney and LLOYDS

-0.48

Correlation Coefficient

Disney  LLOYDS

Very good diversification

The 3 months correlation between Disney and LLOYDS is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney 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 Disney 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 Walt Disney are associated (or correlated) with LLOYDS. 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 Disney i.e., Disney and LLOYDS go up and down completely randomly.

Pair Corralation between Disney and LLOYDS

Considering the 90-day investment horizon Walt Disney is expected to generate 0.97 times more return on investment than LLOYDS. However, Walt Disney is 1.03 times less risky than LLOYDS. It trades about 0.28 of its potential returns per unit of risk. LLOYDS BANKING GROUP is currently generating about -0.16 per unit of risk. If you would invest  8,930  in Walt Disney on September 12, 2024 and sell it today you would earn a total of  2,553  from holding Walt Disney or generate 28.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	73.44%
Values	Daily Returns

Walt Disney  vs.  LLOYDS BANKING GROUP

Walt Disney

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

LLOYDS BANKING GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LLOYDS BANKING GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for LLOYDS BANKING GROUP investors.

Pair Trading with Disney and LLOYDS

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

The idea behind Walt Disney 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .