Correlation Between Stonex and Houlihan Lokey

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

By analyzing existing cross correlation between Stonex Group and Houlihan Lokey, you can compare the effects of market volatilities on Stonex and Houlihan Lokey 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 Stonex with a short position of Houlihan Lokey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stonex and Houlihan Lokey.

Diversification Opportunities for Stonex and Houlihan Lokey

0.41

Correlation Coefficient

Stonex  Houlihan Lokey

Very weak diversification

The 3 months correlation between Stonex and Houlihan is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Stonex Group and Houlihan Lokey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Houlihan Lokey and Stonex 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 Stonex Group are associated (or correlated) with Houlihan Lokey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Houlihan Lokey has no effect on the direction of Stonex i.e., Stonex and Houlihan Lokey go up and down completely randomly.

Pair Corralation between Stonex and Houlihan Lokey

Given the investment horizon of 90 days Stonex Group is expected to generate 1.42 times more return on investment than Houlihan Lokey. However, Stonex is 1.42 times more volatile than Houlihan Lokey. It trades about 0.24 of its potential returns per unit of risk. Houlihan Lokey is currently generating about 0.05 per unit of risk. If you would invest  6,689  in Stonex Group on February 7, 2024 and sell it today you would earn a total of  704.00  from holding Stonex Group or generate 10.52% return on investment over 90 days.

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

Stonex Group  vs.  Houlihan Lokey

Stonex Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stonex Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical and fundamental indicators, Stonex showed solid returns over the last few months and may actually be approaching a breakup point.

Houlihan Lokey

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Houlihan Lokey are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting essential indicators, Houlihan Lokey may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Stonex and Houlihan Lokey

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

The idea behind Stonex Group and Houlihan Lokey 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.