Correlation Between Stifel Financial and Houlihan Lokey

Can any of the company-specific risk be diversified away by investing in both Stifel Financial 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 Stifel Financial and Houlihan Lokey 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 Houlihan Lokey, you can compare the effects of market volatilities on Stifel Financial 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 Stifel Financial with a short position of Houlihan Lokey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stifel Financial and Houlihan Lokey.

Diversification Opportunities for Stifel Financial and Houlihan Lokey

0.54

Correlation Coefficient

Stifel Financial  Houlihan Lokey

Very weak diversification

The 3 months correlation between Stifel and Houlihan is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Stifel Financial Corp and Houlihan Lokey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Houlihan Lokey 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 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 Stifel Financial i.e., Stifel Financial and Houlihan Lokey go up and down completely randomly.

Pair Corralation between Stifel Financial and Houlihan Lokey

Assuming the 90 days horizon Stifel Financial Corp is expected to generate 0.41 times more return on investment than Houlihan Lokey. However, Stifel Financial Corp is 2.43 times less risky than Houlihan Lokey. It trades about -0.04 of its potential returns per unit of risk. Houlihan Lokey is currently generating about -0.06 per unit of risk. If you would invest  2,427  in Stifel Financial Corp on December 29, 2024 and sell it today you would lose (52.00) from holding Stifel Financial Corp or give up 2.14% of portfolio value over 90 days.

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

Stifel Financial Corp  vs.  Houlihan Lokey

Stifel Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stifel Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Stifel Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Stifel Financial and Houlihan Lokey

The main advantage of trading using opposite Stifel Financial and Houlihan Lokey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stifel Financial 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 Stifel Financial Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.