Correlation Between Houlihan Lokey and Heritage Global

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

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

Diversification Opportunities for Houlihan Lokey and Heritage Global

0.19

Correlation Coefficient

Houlihan Lokey  Heritage Global

Average diversification

The 3 months correlation between Houlihan and Heritage is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Houlihan Lokey and Heritage Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Global and Houlihan Lokey 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 Houlihan Lokey are associated (or correlated) with Heritage Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Global has no effect on the direction of Houlihan Lokey i.e., Houlihan Lokey and Heritage Global go up and down completely randomly.

Pair Corralation between Houlihan Lokey and Heritage Global

Considering the 90-day investment horizon Houlihan Lokey is expected to under-perform the Heritage Global. But the stock apears to be less risky and, when comparing its historical volatility, Houlihan Lokey is 1.37 times less risky than Heritage Global. The stock trades about -0.09 of its potential returns per unit of risk. The Heritage Global is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  176.00  in Heritage Global on November 28, 2024 and sell it today you would earn a total of  26.50  from holding Heritage Global or generate 15.06% return on investment over 90 days.

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

Houlihan Lokey  vs.  Heritage Global

Houlihan Lokey

Risk-Adjusted Performance

Very Weak

Over the last 90 days Houlihan Lokey has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Heritage Global

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Global are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Heritage Global disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Houlihan Lokey and Heritage Global

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

The idea behind Houlihan Lokey and Heritage Global 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.