Correlation Between Adams Natural and Hargreaves Lansdown

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

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

Diversification Opportunities for Adams Natural and Hargreaves Lansdown

0.26

Correlation Coefficient

Adams Natural  Hargreaves Lansdown

Modest diversification

The 3 months correlation between Adams and Hargreaves is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Adams Natural Resources 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 Adams Natural 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 Adams Natural Resources 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 Adams Natural i.e., Adams Natural and Hargreaves Lansdown go up and down completely randomly.

Pair Corralation between Adams Natural and Hargreaves Lansdown

Considering the 90-day investment horizon Adams Natural Resources is expected to under-perform the Hargreaves Lansdown. But the fund apears to be less risky and, when comparing its historical volatility, Adams Natural Resources is 1.86 times less risky than Hargreaves Lansdown. The fund trades about -0.12 of its potential returns per unit of risk. The Hargreaves Lansdown plc is currently generating about -0.06 of returns per unit of risk over similar time horizon. 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Adams Natural Resources  vs.  Hargreaves Lansdown plc

Adams Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adams Natural Resources has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy technical and fundamental indicators, Adams Natural is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Adams Natural and Hargreaves Lansdown

The main advantage of trading using opposite Adams Natural and Hargreaves Lansdown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Natural 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 Adams Natural Resources 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.