Correlation Between Houlihan Lokey and Nomura Holdings

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

By analyzing existing cross correlation between Houlihan Lokey and Nomura Holdings ADR, you can compare the effects of market volatilities on Houlihan Lokey and Nomura Holdings 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 Nomura Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Houlihan Lokey and Nomura Holdings.

Diversification Opportunities for Houlihan Lokey and Nomura Holdings

0.09

Correlation Coefficient

Houlihan Lokey  Nomura Holdings

Significant diversification

The 3 months correlation between Houlihan and Nomura is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Houlihan Lokey and Nomura Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings ADR 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 Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings ADR has no effect on the direction of Houlihan Lokey i.e., Houlihan Lokey and Nomura Holdings go up and down completely randomly.

Pair Corralation between Houlihan Lokey and Nomura Holdings

Considering the 90-day investment horizon Houlihan Lokey is expected to under-perform the Nomura Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Houlihan Lokey is 1.1 times less risky than Nomura Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The Nomura Holdings ADR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  583.00  in Nomura Holdings ADR on December 29, 2024 and sell it today you would earn a total of  56.00  from holding Nomura Holdings ADR or generate 9.61% 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.  Nomura Holdings ADR

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.

Nomura Holdings ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nomura Holdings ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Nomura Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Houlihan Lokey and Nomura Holdings

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

The idea behind Houlihan Lokey and Nomura Holdings ADR 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.