Correlation Between Bank of America and Hargreaves Lansdown

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

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

Diversification Opportunities for Bank of America and Hargreaves Lansdown

-0.78

Correlation Coefficient

Bank of America  Hargreaves Lansdown

Pay attention - limited upside

The 3 months correlation between Bank and Hargreaves is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America 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 Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and Hargreaves Lansdown go up and down completely randomly.

Pair Corralation between Bank of America and Hargreaves Lansdown

Considering the 90-day investment horizon Bank of America is expected to under-perform the Hargreaves Lansdown. In addition to that, Bank of America is 1.19 times more volatile than Hargreaves Lansdown plc. It trades about -0.03 of its total potential returns per unit of risk. Hargreaves Lansdown plc is currently generating about 0.08 per unit of volatility. If you would invest  892.00  in Hargreaves Lansdown plc on February 3, 2024 and sell it today you would earn a total of  19.00  from holding Hargreaves Lansdown plc or generate 2.13% return on investment over 90 days.

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

Bank of America  vs.  Hargreaves Lansdown plc

Bank of America

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in June 2024.

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank of America and Hargreaves Lansdown

The main advantage of trading using opposite Bank of America and Hargreaves Lansdown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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 Bank of America 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.