Correlation Between Hargreaves Lansdown and Omega Healthcare

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

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

Diversification Opportunities for Hargreaves Lansdown and Omega Healthcare

-0.89

Correlation Coefficient

Hargreaves Lansdown  Omega Healthcare

Pay attention - limited upside

The 3 months correlation between Hargreaves and Omega is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hargreaves Lansdown plc and Omega Healthcare Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omega Healthcare Inv and Hargreaves Lansdown 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 Hargreaves Lansdown plc are associated (or correlated) with Omega Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omega Healthcare Inv has no effect on the direction of Hargreaves Lansdown i.e., Hargreaves Lansdown and Omega Healthcare go up and down completely randomly.

Pair Corralation between Hargreaves Lansdown and Omega Healthcare

Assuming the 90 days trading horizon Hargreaves Lansdown plc is expected to generate 0.08 times more return on investment than Omega Healthcare. However, Hargreaves Lansdown plc is 12.69 times less risky than Omega Healthcare. It trades about 0.22 of its potential returns per unit of risk. Omega Healthcare Investors is currently generating about -0.1 per unit of risk. If you would invest  108,600  in Hargreaves Lansdown plc on October 25, 2024 and sell it today you would earn a total of  1,750  from holding Hargreaves Lansdown plc or generate 1.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Hargreaves Lansdown plc  vs.  Omega Healthcare Investors

Hargreaves Lansdown plc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hargreaves Lansdown plc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Hargreaves Lansdown is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Omega Healthcare Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Omega Healthcare Investors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Hargreaves Lansdown and Omega Healthcare

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

The idea behind Hargreaves Lansdown plc and Omega Healthcare Investors 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.