Correlation Between Mastercard and Houlihan Lokey

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

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

Diversification Opportunities for Mastercard and Houlihan Lokey

0.33

Correlation Coefficient

Mastercard  Houlihan Lokey

Weak diversification

The 3 months correlation between Mastercard and Houlihan is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Houlihan Lokey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Houlihan Lokey and Mastercard 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 Mastercard 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 Mastercard i.e., Mastercard and Houlihan Lokey go up and down completely randomly.

Pair Corralation between Mastercard and Houlihan Lokey

Allowing for the 90-day total investment horizon Mastercard is expected to generate 0.67 times more return on investment than Houlihan Lokey. However, Mastercard is 1.5 times less risky than Houlihan Lokey. It trades about 0.09 of its potential returns per unit of risk. Houlihan Lokey is currently generating about -0.07 per unit of risk. If you would invest  52,476  in Mastercard on December 29, 2024 and sell it today you would earn a total of  3,281  from holding Mastercard or generate 6.25% return on investment over 90 days.

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

Mastercard  vs.  Houlihan Lokey

Mastercard

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mastercard may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Mastercard and Houlihan Lokey

The main advantage of trading using opposite Mastercard and Houlihan Lokey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard 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 Mastercard 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.