Correlation Between Steel Dynamics and Lloyds Banking
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics 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 Steel Dynamics and Lloyds Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Lloyds Banking Group, you can compare the effects of market volatilities on Steel Dynamics 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 Steel Dynamics with a short position of Lloyds Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Lloyds Banking.
Diversification Opportunities for Steel Dynamics and Lloyds Banking
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and Lloyds is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics 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 Steel Dynamics 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 Steel Dynamics 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 Steel Dynamics i.e., Steel Dynamics and Lloyds Banking go up and down completely randomly.
Pair Corralation between Steel Dynamics and Lloyds Banking
Given the investment horizon of 90 days Steel Dynamics is expected to generate 2.06 times less return on investment than Lloyds Banking. But when comparing it to its historical volatility, Steel Dynamics is 1.96 times less risky than Lloyds Banking. It trades about 0.05 of its potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 53.00 in Lloyds Banking Group on August 26, 2024 and sell it today you would earn a total of 16.00 from holding Lloyds Banking Group or generate 30.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 81.12% |
| Values | Daily Returns |
Steel Dynamics vs. Lloyds Banking Group
Performance |
| Timeline |
| Steel Dynamics |
| Lloyds Banking Group |
Steel Dynamics and Lloyds Banking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Lloyds Banking
The main advantage of trading using opposite Steel Dynamics and Lloyds Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Lloyds Banking 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 Banking will offset losses from the drop in Lloyds Banking's long position.The idea behind Steel Dynamics and Lloyds Banking Group 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.| Lloyds Banking vs. PSB Holdings | Lloyds Banking vs. United Overseas Bank | Lloyds Banking vs. Turkiye Garanti Bankasi |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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