Can any of the company-specific risk be diversified away by investing in both GORE German 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 GORE German and Lloyds Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GORE German Office and Lloyds Banking Group, you can compare the effects of market volatilities on GORE German 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 GORE German with a short position of Lloyds Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of GORE German and Lloyds Banking.
Diversification Opportunities for GORE German and Lloyds Banking
The 3 months correlation between GORE and Lloyds is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding GORE German Office 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 GORE German 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 GORE German Office 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 GORE German i.e., GORE German and Lloyds Banking go up and down completely randomly.
Pair Corralation between GORE German and Lloyds Banking
Assuming the 90 days trading horizon GORE German Office is expected to under-perform the Lloyds Banking. In addition to that, GORE German is 4.37 times more volatile than Lloyds Banking Group. It trades about -0.05 of its total potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.14 per unit of volatility. If you would invest 55.00 in Lloyds Banking Group on March 6, 2024 and sell it today you would earn a total of 11.00 from holding Lloyds Banking Group or generate 20.0% return on investment over 90 days.
Over the last 90 days GORE German Office has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Lloyds Banking Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lloyds Banking reported solid returns over the last few months and may actually be approaching a breakup point.