Correlation Between Scully Royalty and Houlihan Lokey

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

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

Diversification Opportunities for Scully Royalty and Houlihan Lokey

-0.33

Correlation Coefficient

Scully Royalty  Houlihan Lokey

Very good diversification

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

Pair Corralation between Scully Royalty and Houlihan Lokey

Considering the 90-day investment horizon Scully Royalty is expected to under-perform the Houlihan Lokey. In addition to that, Scully Royalty is 1.32 times more volatile than Houlihan Lokey. It trades about -0.02 of its total potential returns per unit of risk. Houlihan Lokey is currently generating about 0.2 per unit of volatility. If you would invest  15,145  in Houlihan Lokey on September 2, 2024 and sell it today you would earn a total of  3,764  from holding Houlihan Lokey or generate 24.85% return on investment over 90 days.

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

Scully Royalty  vs.  Houlihan Lokey

Scully Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scully Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Scully Royalty is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Houlihan Lokey

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Houlihan Lokey are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, Houlihan Lokey demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scully Royalty and Houlihan Lokey

The main advantage of trading using opposite Scully Royalty and Houlihan Lokey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scully Royalty 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 Scully Royalty 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.