Correlation Between Hargreaves Lansdown and Schroders PLC

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

Diversification Opportunities for Hargreaves Lansdown and Schroders PLC

0.05

Correlation Coefficient

Hargreaves Lansdown  Schroders PLC

Significant diversification

The 3 months correlation between Hargreaves and Schroders is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hargreaves Lansdown plc and Schroders PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schroders PLC 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 Schroders PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schroders PLC has no effect on the direction of Hargreaves Lansdown i.e., Hargreaves Lansdown and Schroders PLC go up and down completely randomly.

Pair Corralation between Hargreaves Lansdown and Schroders PLC

Assuming the 90 days horizon Hargreaves Lansdown plc is expected to generate 0.79 times more return on investment than Schroders PLC. However, Hargreaves Lansdown plc is 1.26 times less risky than Schroders PLC. It trades about -0.06 of its potential returns per unit of risk. Schroders PLC is currently generating about -0.22 per unit of risk. If you would invest  1,315  in Hargreaves Lansdown plc on October 9, 2024 and sell it today you would lose (29.00) from holding Hargreaves Lansdown plc or give up 2.21% of portfolio value over 90 days.

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

Hargreaves Lansdown plc  vs.  Schroders PLC

Hargreaves Lansdown plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hargreaves Lansdown plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Schroders PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hargreaves Lansdown and Schroders PLC

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

The idea behind Hargreaves Lansdown plc and Schroders 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.