Correlation Between LLOYDS METALS and VA Tech

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Can any of the company-specific risk be diversified away by investing in both LLOYDS METALS and VA Tech 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 METALS and VA Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LLOYDS METALS AND and VA Tech Wabag, you can compare the effects of market volatilities on LLOYDS METALS and VA Tech 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 METALS with a short position of VA Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of LLOYDS METALS and VA Tech.

Diversification Opportunities for LLOYDS METALS and VA Tech

-0.6
  Correlation Coefficient

Excellent diversification

The 3 months correlation between LLOYDS and WABAG is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding LLOYDS METALS AND and VA Tech Wabag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VA Tech Wabag and LLOYDS METALS 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 METALS AND are associated (or correlated) with VA Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VA Tech Wabag has no effect on the direction of LLOYDS METALS i.e., LLOYDS METALS and VA Tech go up and down completely randomly.

Pair Corralation between LLOYDS METALS and VA Tech

Assuming the 90 days trading horizon LLOYDS METALS AND is expected to generate 1.14 times more return on investment than VA Tech. However, LLOYDS METALS is 1.14 times more volatile than VA Tech Wabag. It trades about 0.31 of its potential returns per unit of risk. VA Tech Wabag is currently generating about -0.09 per unit of risk. If you would invest  116,270  in LLOYDS METALS AND on October 24, 2024 and sell it today you would earn a total of  25,145  from holding LLOYDS METALS AND or generate 21.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

LLOYDS METALS AND  vs.  VA Tech Wabag

 Performance 
       Timeline  
LLOYDS METALS AND 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in LLOYDS METALS AND are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, LLOYDS METALS displayed solid returns over the last few months and may actually be approaching a breakup point.
VA Tech Wabag 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days VA Tech Wabag has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

LLOYDS METALS and VA Tech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LLOYDS METALS and VA Tech

The main advantage of trading using opposite LLOYDS METALS and VA Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LLOYDS METALS position performs unexpectedly, VA Tech 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 VA Tech will offset losses from the drop in VA Tech's long position.
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The idea behind LLOYDS METALS AND and VA Tech Wabag 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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