Correlation Between Xp and Houlihan Lokey

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

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

Diversification Opportunities for Xp and Houlihan Lokey

-0.36

Correlation Coefficient

Xp  Houlihan Lokey

Very good diversification

The 3 months correlation between Xp and Houlihan is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and Houlihan Lokey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Houlihan Lokey and Xp 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 Xp Inc 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 Xp i.e., Xp and Houlihan Lokey go up and down completely randomly.

Pair Corralation between Xp and Houlihan Lokey

Allowing for the 90-day total investment horizon Xp Inc is expected to generate 1.45 times more return on investment than Houlihan Lokey. However, Xp is 1.45 times more volatile than Houlihan Lokey. It trades about 0.14 of its potential returns per unit of risk. Houlihan Lokey is currently generating about -0.03 per unit of risk. If you would invest  1,208  in Xp Inc on December 27, 2024 and sell it today you would earn a total of  257.00  from holding Xp Inc or generate 21.27% return on investment over 90 days.

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

Xp Inc  vs.  Houlihan Lokey

Xp Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xp Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Xp reported solid returns over the last few months and may actually be approaching a breakup point.

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 fairly strong essential indicators, Houlihan Lokey is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Xp and Houlihan Lokey

The main advantage of trading using opposite Xp and Houlihan Lokey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xp 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 Xp Inc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.