Correlation Between Lloyds Banking and Hoteles City

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

Diversification Opportunities for Lloyds Banking and Hoteles City

0.0

Correlation Coefficient

Lloyds Banking  Hoteles City

Pay attention - limited upside

The 3 months correlation between Lloyds and Hoteles is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Hoteles City Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoteles City Express 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 Hoteles City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoteles City Express has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Hoteles City go up and down completely randomly.

Pair Corralation between Lloyds Banking and Hoteles City

Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 0.69 times more return on investment than Hoteles City. However, Lloyds Banking Group is 1.46 times less risky than Hoteles City. It trades about 0.04 of its potential returns per unit of risk. Hoteles City Express is currently generating about -0.05 per unit of risk. If you would invest  3,775  in Lloyds Banking Group on September 5, 2024 and sell it today you would earn a total of  1,175  from holding Lloyds Banking Group or generate 31.13% return on investment over 90 days.

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

Lloyds Banking Group  vs.  Hoteles City Express

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 fairly 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.

Hoteles City Express

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hoteles City Express are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Hoteles City may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lloyds Banking and Hoteles City

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

The idea behind Lloyds Banking Group and Hoteles City Express 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.