Correlation Between DXC Technology and Lloyds Banking

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

By analyzing existing cross correlation between DXC Technology and Lloyds Banking Group, you can compare the effects of market volatilities on DXC Technology 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 DXC Technology with a short position of Lloyds Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXC Technology and Lloyds Banking.

Diversification Opportunities for DXC Technology and Lloyds Banking

0.0

Correlation Coefficient

DXC Technology  Lloyds Banking

Pay attention - limited upside

The 3 months correlation between DXC and Lloyds is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology 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 DXC Technology 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 DXC Technology 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 DXC Technology i.e., DXC Technology and Lloyds Banking go up and down completely randomly.

Pair Corralation between DXC Technology and Lloyds Banking

Assuming the 90 days trading horizon DXC Technology is expected to under-perform the Lloyds Banking. But the stock apears to be less risky and, when comparing its historical volatility, DXC Technology is 1.26 times less risky than Lloyds Banking. The stock trades about -0.07 of its potential returns per unit of risk. The Lloyds Banking Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,775  in Lloyds Banking Group on September 5, 2024 and sell it today you would earn a total of  1,175  from holding Lloyds Banking Group or generate 31.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DXC Technology  vs.  Lloyds Banking Group

DXC Technology

Risk-Adjusted Performance

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Very Weak

Over the last 90 days DXC Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, DXC Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lloyds Banking Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with DXC Technology and Lloyds Banking

The main advantage of trading using opposite DXC Technology and Lloyds Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXC Technology 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 DXC Technology 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.