Correlation Between Monks Investment and Hargreaves Lansdown

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

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

Diversification Opportunities for Monks Investment and Hargreaves Lansdown

0.75

Correlation Coefficient

Monks Investment  Hargreaves Lansdown

Poor diversification

The 3 months correlation between Monks and Hargreaves is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Monks Investment Trust 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 Monks Investment 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 Monks Investment Trust 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 Monks Investment i.e., Monks Investment and Hargreaves Lansdown go up and down completely randomly.

Pair Corralation between Monks Investment and Hargreaves Lansdown

Assuming the 90 days trading horizon Monks Investment Trust is expected to under-perform the Hargreaves Lansdown. In addition to that, Monks Investment is 8.04 times more volatile than Hargreaves Lansdown plc. It trades about -0.12 of its total potential returns per unit of risk. Hargreaves Lansdown plc is currently generating about 0.21 per unit of volatility. If you would invest  109,700  in Hargreaves Lansdown plc on October 15, 2024 and sell it today you would earn a total of  500.00  from holding Hargreaves Lansdown plc or generate 0.46% return on investment over 90 days.

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

Monks Investment Trust  vs.  Hargreaves Lansdown plc

Monks Investment Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Monks Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 Monks Investment and Hargreaves Lansdown

The main advantage of trading using opposite Monks Investment and Hargreaves Lansdown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monks Investment 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 Monks Investment Trust 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 Transaction History module to view history of all your transactions and understand their impact on performance.