Correlation Between Hardide PLC and Lloyds Banking

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

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

Diversification Opportunities for Hardide PLC and Lloyds Banking

0.63

Correlation Coefficient

Hardide PLC  Lloyds Banking

Poor diversification

The 3 months correlation between Hardide and Lloyds is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Hardide PLC 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 Hardide PLC 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 Hardide PLC 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 Hardide PLC i.e., Hardide PLC and Lloyds Banking go up and down completely randomly.

Pair Corralation between Hardide PLC and Lloyds Banking

Assuming the 90 days trading horizon Hardide PLC is expected to under-perform the Lloyds Banking. In addition to that, Hardide PLC is 1.44 times more volatile than Lloyds Banking Group. It trades about -0.1 of its total potential returns per unit of risk. Lloyds Banking Group is currently generating about -0.08 per unit of volatility. If you would invest  5,812  in Lloyds Banking Group on September 1, 2024 and sell it today you would lose (506.00) from holding Lloyds Banking Group or give up 8.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.48%
Values	Daily Returns

Hardide PLC  vs.  Lloyds Banking Group

Hardide PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hardide PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Hardide PLC and Lloyds Banking

The main advantage of trading using opposite Hardide PLC and Lloyds Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hardide PLC 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 Hardide PLC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.