Correlation Between Lloyds Banking and Paycom Software

Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and Paycom Software 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 Paycom Software 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 Paycom Software, you can compare the effects of market volatilities on Lloyds Banking and Paycom Software 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 Paycom Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and Paycom Software.

Diversification Opportunities for Lloyds Banking and Paycom Software

0.67

Correlation Coefficient

Lloyds Banking  Paycom Software

Poor diversification

The 3 months correlation between Lloyds and Paycom is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Paycom Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paycom Software 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 Paycom Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paycom Software has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Paycom Software go up and down completely randomly.

Pair Corralation between Lloyds Banking and Paycom Software

Assuming the 90 days trading horizon Lloyds Banking Group is expected to generate 0.82 times more return on investment than Paycom Software. However, Lloyds Banking Group is 1.22 times less risky than Paycom Software. It trades about 0.08 of its potential returns per unit of risk. Paycom Software is currently generating about 0.03 per unit of risk. If you would invest  2,088  in Lloyds Banking Group on April 20, 2025 and sell it today you would earn a total of  280.00  from holding Lloyds Banking Group or generate 13.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.78%
Values	Daily Returns

Lloyds Banking Group  vs.  Paycom Software

Lloyds Banking Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lloyds Banking Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lloyds Banking may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Paycom Software

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Paycom Software are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Paycom Software is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lloyds Banking and Paycom Software

The main advantage of trading using opposite Lloyds Banking and Paycom Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, Paycom Software 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 Paycom Software will offset losses from the drop in Paycom Software's long position.

The idea behind Lloyds Banking Group and Paycom Software 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.