Are you overlooking correlation risk in multi-underlying kickouts?
13th May 2026
Correlation can have a significant impact on how multi-underlying kickouts behave over time, yet it is often overlooked. Here's what we're doing to help.
At hop Investing, an appointed representative of Dura Capital, we are continually focused on innovation to help advisers and their clients access investment solutions aligned with their financial objectives.
Our latest structured deposit stock basket product has been developed in conjunction with our banking partner and incorporates a range of structural features designed to provide greater flexibility when compared with traditional basket autocall structures.
Understanding correlation
Stock basket products often offer attractive headline coupons, which can be influenced by the correlation of the underlying assets. Correlation measures the extent to which assets move together over time and can influence the likelihood of coupons being paid or autocall conditions being achieved.
- High correlation: assets are more likely to move together
- Low or negative correlation: assets may behave more independently
Lower correlation between assets can increase the dispersion between the best and worst performing stocks within a basket. For example, a basket comprising telecommunications, pharmaceutical and oil companies may exhibit lower correlation because each sector is influenced by different economic and market drivers.
While lower correlation can contribute to higher potential coupons, it may also increase the likelihood that some stocks perform differently from others during the investment term.
A practical example was seen during the COVID-19 period, when pharmaceutical companies generally performed strongly while many oil-related stocks experienced significant pressure. This divergence illustrates how sector-specific factors can influence basket performance.
Product structure features
Traditional stock basket products are commonly assessed annually to determine whether an autocall event has occurred. This structure incorporates several additional features intended to provide greater flexibility during the investment term:
1. Daily autocall observations
Rather than annual autocall checks, the product is monitored daily, providing up to 766 business-day observation opportunities during the term.
2. Lock In feature
Each stock is assessed independently. If an individual stock reaches the required level, it "locks in", allowing the remaining stocks to continue to be monitored independently. Once all three stocks have satisfied the required conditions, the investment matures with the stated return.
3. Step-down autocall barriers
The autocall barrier reduces over time, lowering the performance threshold required later in the term.
Example product terms
Example basket: Nike, Tesla and Nestlé.
- Structured deposit
- Fixed coupon: 8.00% a year
- Step-down autocall schedule:
- 95% after year 2
- 85% after year 3
- 75% during the final year of the investment term
As a structured deposit, eligible deposits may benefit from FSCS protection up to applicable limits, subject to FSCS eligibility criteria and the financial standing of the deposit taker.
Returns are dependent on the product terms being satisfied. Investors should carefully consider the terms and conditions of the product before investing.
You can view the full terms of the product here.
For financial advisers only. Past performance is not a reliable indicator of future performance.