Correlation Between Lloyds Banking and Home Depot
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and Home Depot 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 Home Depot 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 The Home Depot, you can compare the effects of market volatilities on Lloyds Banking and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and Home Depot.
Diversification Opportunities for Lloyds Banking and Home Depot
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lloyds and Home is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Home Depot go up and down completely randomly.
Pair Corralation between Lloyds Banking and Home Depot
Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 3.23 times more return on investment than Home Depot. However, Lloyds Banking is 3.23 times more volatile than The Home Depot. It trades about 0.22 of its potential returns per unit of risk. The Home Depot is currently generating about 0.15 per unit of risk. If you would invest 4,950 in Lloyds Banking Group on November 2, 2024 and sell it today you would earn a total of 1,274 from holding Lloyds Banking Group or generate 25.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lloyds Banking Group vs. The Home Depot
Performance |
| Timeline |
| Lloyds Banking Group |
| Home Depot |
Lloyds Banking and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and Home Depot
The main advantage of trading using opposite Lloyds Banking and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Lloyds Banking vs. Verizon Communications | Lloyds Banking vs. FibraHotel | Lloyds Banking vs. Grupo Sports World | Lloyds Banking vs. Costco Wholesale |
| Home Depot vs. Micron Technology | Home Depot vs. Monster Beverage Corp | Home Depot vs. DXC Technology | Home Depot vs. McEwen Mining |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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