Correlation Between Lloyds Banking and Liberty Northwest

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

Diversification Opportunities for Lloyds Banking and Liberty Northwest

-0.36

Correlation Coefficient

Lloyds Banking  Liberty Northwest

Very good diversification

The 3 months correlation between Lloyds and Liberty is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Liberty Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Northwest Bancorp 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 Liberty Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Northwest Bancorp has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Liberty Northwest go up and down completely randomly.

Pair Corralation between Lloyds Banking and Liberty Northwest

Assuming the 90 days horizon Lloyds Banking Group is expected to generate 2.92 times more return on investment than Liberty Northwest. However, Lloyds Banking is 2.92 times more volatile than Liberty Northwest Bancorp. It trades about -0.01 of its potential returns per unit of risk. Liberty Northwest Bancorp is currently generating about -0.23 per unit of risk. If you would invest  65.00  in Lloyds Banking Group on September 25, 2024 and sell it today you would lose (1.00) from holding Lloyds Banking Group or give up 1.54% 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.  Liberty Northwest Bancorp

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 latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Liberty Northwest Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Northwest Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Liberty Northwest is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Lloyds Banking and Liberty Northwest

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

The idea behind Lloyds Banking Group and Liberty Northwest Bancorp 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.