Correlation Between Lindsell Train and Hargreaves Lansdown

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

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

Diversification Opportunities for Lindsell Train and Hargreaves Lansdown

0.6

Correlation Coefficient

Lindsell Train  Hargreaves Lansdown

Poor diversification

The 3 months correlation between Lindsell and Hargreaves is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment 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 Lindsell Train 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 Lindsell Train Investment 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 Lindsell Train i.e., Lindsell Train and Hargreaves Lansdown go up and down completely randomly.

Pair Corralation between Lindsell Train and Hargreaves Lansdown

Assuming the 90 days trading horizon Lindsell Train Investment is expected to generate 14.97 times more return on investment than Hargreaves Lansdown. However, Lindsell Train is 14.97 times more volatile than Hargreaves Lansdown plc. It trades about 0.11 of its potential returns per unit of risk. Hargreaves Lansdown plc is currently generating about 0.19 per unit of risk. If you would invest  73,900  in Lindsell Train Investment on October 23, 2024 and sell it today you would earn a total of  8,400  from holding Lindsell Train Investment or generate 11.37% return on investment over 90 days.

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

Lindsell Train Investment  vs.  Hargreaves Lansdown plc

Lindsell Train Investment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Lindsell Train may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hargreaves Lansdown plc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hargreaves Lansdown plc are ranked lower than 15 (%) 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.

Pair Trading with Lindsell Train and Hargreaves Lansdown

The main advantage of trading using opposite Lindsell Train and Hargreaves Lansdown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lindsell Train 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 Lindsell Train Investment 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.