Correlation Between Stifel Financial and Heritage Global

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

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

Diversification Opportunities for Stifel Financial and Heritage Global

0.44

Correlation Coefficient

Stifel Financial  Heritage Global

Very weak diversification

The 3 months correlation between Stifel and Heritage is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Stifel Financial Corp and Heritage Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Global and Stifel Financial 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 Stifel Financial Corp 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 Stifel Financial i.e., Stifel Financial and Heritage Global go up and down completely randomly.

Pair Corralation between Stifel Financial and Heritage Global

Assuming the 90 days horizon Stifel Financial is expected to generate 20.8 times less return on investment than Heritage Global. But when comparing it to its historical volatility, Stifel Financial Corp is 5.05 times less risky than Heritage Global. It trades about 0.04 of its potential returns per unit of risk. Heritage Global is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  175.00  in Heritage Global on December 29, 2024 and sell it today you would earn a total of  50.00  from holding Heritage Global or generate 28.57% return on investment over 90 days.

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

Stifel Financial Corp  vs.  Heritage Global

Stifel Financial Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stifel Financial Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Stifel Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Heritage Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Global are ranked lower than 11 (%) 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 Stifel Financial and Heritage Global

The main advantage of trading using opposite Stifel Financial and Heritage Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stifel Financial 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 Stifel Financial Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.