Correlation Between Lloyds Banking and CM Hospitalar

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

Diversification Opportunities for Lloyds Banking and CM Hospitalar

-0.31

Correlation Coefficient

Lloyds Banking  CM Hospitalar

Very good diversification

The 3 months correlation between Lloyds and VVEO3 is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and CM Hospitalar SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CM Hospitalar SA 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 CM Hospitalar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CM Hospitalar SA has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and CM Hospitalar go up and down completely randomly.

Pair Corralation between Lloyds Banking and CM Hospitalar

Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 0.4 times more return on investment than CM Hospitalar. However, Lloyds Banking Group is 2.52 times less risky than CM Hospitalar. It trades about -0.01 of its potential returns per unit of risk. CM Hospitalar SA is currently generating about -0.05 per unit of risk. If you would invest  1,700  in Lloyds Banking Group on September 13, 2024 and sell it today you would lose (44.00) from holding Lloyds Banking Group or give up 2.59% of portfolio value over 90 days.

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

Lloyds Banking Group  vs.  CM Hospitalar SA

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 somewhat strong basic indicators, Lloyds Banking is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CM Hospitalar SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CM Hospitalar SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lloyds Banking and CM Hospitalar

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

The idea behind Lloyds Banking Group and CM Hospitalar SA 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.