Correlation Between Cisco Systems and Hargreaves Lansdown

Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Hargreaves Lansdown 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 Cisco Systems and Hargreaves Lansdown into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cisco Systems and Hargreaves Lansdown plc, you can compare the effects of market volatilities on Cisco Systems and Hargreaves Lansdown 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 Cisco Systems with a short position of Hargreaves Lansdown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Hargreaves Lansdown.

Diversification Opportunities for Cisco Systems and Hargreaves Lansdown

-0.66

Correlation Coefficient

Cisco Systems  Hargreaves Lansdown

Excellent diversification

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

Pair Corralation between Cisco Systems and Hargreaves Lansdown

Given the investment horizon of 90 days Cisco Systems is expected to generate 2.84 times less return on investment than Hargreaves Lansdown. But when comparing it to its historical volatility, Cisco Systems is 3.66 times less risky than Hargreaves Lansdown. It trades about 0.06 of its potential returns per unit of risk. Hargreaves Lansdown plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  942.00  in Hargreaves Lansdown plc on October 11, 2024 and sell it today you would earn a total of  470.00  from holding Hargreaves Lansdown plc or generate 49.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.45%
Values	Daily Returns

Cisco Systems  vs.  Hargreaves Lansdown plc

Cisco Systems

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hargreaves Lansdown plc

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Hargreaves Lansdown plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Hargreaves Lansdown is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cisco Systems and Hargreaves Lansdown

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

The idea behind Cisco Systems and Hargreaves Lansdown plc 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.