Correlation Between Hargreaves Lansdown and Flow Capital

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

Diversification Opportunities for Hargreaves Lansdown and Flow Capital

-0.23

Correlation Coefficient

Hargreaves Lansdown  Flow Capital

Very good diversification

The 3 months correlation between Hargreaves and Flow is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hargreaves Lansdown plc and Flow Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flow Capital Corp 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 Flow Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flow Capital Corp has no effect on the direction of Hargreaves Lansdown i.e., Hargreaves Lansdown and Flow Capital go up and down completely randomly.

Pair Corralation between Hargreaves Lansdown and Flow Capital

Assuming the 90 days horizon Hargreaves Lansdown is expected to generate 1.18 times less return on investment than Flow Capital. In addition to that, Hargreaves Lansdown is 2.35 times more volatile than Flow Capital Corp. It trades about 0.08 of its total potential returns per unit of risk. Flow Capital Corp is currently generating about 0.22 per unit of volatility. If you would invest  37.00  in Flow Capital Corp on January 30, 2024 and sell it today you would earn a total of  1.00  from holding Flow Capital Corp or generate 2.7% return on investment over 90 days.

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

Hargreaves Lansdown plc  vs.  Flow Capital Corp

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 nearly stable essential indicators, Hargreaves Lansdown is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Flow Capital Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flow Capital Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Flow Capital is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hargreaves Lansdown and Flow Capital

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

The idea behind Hargreaves Lansdown plc and Flow Capital Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.