Correlation Between Nasdaq and LLOYDS

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

By analyzing existing cross correlation between Nasdaq Inc and LLOYDS 8, you can compare the effects of market volatilities on Nasdaq 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 Nasdaq with a short position of LLOYDS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and LLOYDS.

Diversification Opportunities for Nasdaq and LLOYDS

-0.13

Correlation Coefficient

Nasdaq  LLOYDS

Good diversification

The 3 months correlation between Nasdaq and LLOYDS is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and LLOYDS 8 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LLOYDS 8 and Nasdaq 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 Nasdaq Inc 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 8 has no effect on the direction of Nasdaq i.e., Nasdaq and LLOYDS go up and down completely randomly.

Pair Corralation between Nasdaq and LLOYDS

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.83 times more return on investment than LLOYDS. However, Nasdaq Inc is 1.21 times less risky than LLOYDS. It trades about 0.14 of its potential returns per unit of risk. LLOYDS 8 is currently generating about 0.02 per unit of risk. If you would invest  5,461  in Nasdaq Inc on September 12, 2024 and sell it today you would earn a total of  2,673  from holding Nasdaq Inc or generate 48.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.65%
Values	Daily Returns

Nasdaq Inc  vs.  LLOYDS 8

Nasdaq Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LLOYDS 8

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LLOYDS 8 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LLOYDS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and LLOYDS

The main advantage of trading using opposite Nasdaq and LLOYDS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc and LLOYDS 8 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.