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

0.44

Correlation Coefficient

Adams Natural  Hargreaves Lansdown

Very weak diversification

The 3 months correlation between Adams and Hargreaves is 0.44. 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

If you would invest  2,135  in Adams Natural Resources on February 3, 2024 and sell it today you would earn a total of  173.00  from holding Adams Natural Resources or generate 8.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	2.33%
Values	Daily Returns

Adams Natural Resources  vs.  Hargreaves Lansdown PLC

Adams Natural Resources

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Natural Resources are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of very fragile technical and fundamental indicators, Adams Natural displayed solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of fairly strong essential indicators, Hargreaves Lansdown is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.