Correlation Between Lloyds Enterprises and Generic Engineering

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

By analyzing existing cross correlation between Lloyds Enterprises Limited and Generic Engineering Construction, you can compare the effects of market volatilities on Lloyds Enterprises and Generic Engineering 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 Enterprises with a short position of Generic Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Enterprises and Generic Engineering.

Diversification Opportunities for Lloyds Enterprises and Generic Engineering

0.66

Correlation Coefficient

Lloyds Enterprises  Generic Engineering

Poor diversification

The 3 months correlation between Lloyds and Generic is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Enterprises Limited and Generic Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Engineering and Lloyds Enterprises 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 Enterprises Limited are associated (or correlated) with Generic Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Engineering has no effect on the direction of Lloyds Enterprises i.e., Lloyds Enterprises and Generic Engineering go up and down completely randomly.

Pair Corralation between Lloyds Enterprises and Generic Engineering

Assuming the 90 days trading horizon Lloyds Enterprises Limited is expected to generate 1.05 times more return on investment than Generic Engineering. However, Lloyds Enterprises is 1.05 times more volatile than Generic Engineering Construction. It trades about 0.19 of its potential returns per unit of risk. Generic Engineering Construction is currently generating about 0.11 per unit of risk. If you would invest  5,305  in Lloyds Enterprises Limited on April 25, 2025 and sell it today you would earn a total of  2,902  from holding Lloyds Enterprises Limited or generate 54.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Lloyds Enterprises Limited  vs.  Generic Engineering Constructi

Lloyds Enterprises

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lloyds Enterprises Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Lloyds Enterprises exhibited solid returns over the last few months and may actually be approaching a breakup point.

Generic Engineering

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Engineering Construction are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, Generic Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lloyds Enterprises and Generic Engineering

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

The idea behind Lloyds Enterprises Limited and Generic Engineering Construction 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.