Correlation Between Visa and Houlihan Lokey
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Houlihan Lokey into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Houlihan Lokey, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Houlihan Lokey. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Houlihan Lokey.
Diversification Opportunities for Visa and Houlihan Lokey
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and Houlihan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Houlihan Lokey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Houlihan Lokey and Visa 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 Visa Class A 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 Visa i.e., Visa and Houlihan Lokey go up and down completely randomly.
Pair Corralation between Visa and Houlihan Lokey
Taking into account the 90-day investment horizon Visa is expected to generate 1.36 times less return on investment than Houlihan Lokey. But when comparing it to its historical volatility, Visa Class A is 2.0 times less risky than Houlihan Lokey. It trades about 0.35 of its potential returns per unit of risk. Houlihan Lokey is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 16,601 in Houlihan Lokey on August 26, 2024 and sell it today you would earn a total of 2,273 from holding Houlihan Lokey or generate 13.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Houlihan Lokey
Performance |
| Timeline |
| Visa Class A |
| Houlihan Lokey |
Visa and Houlihan Lokey Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Houlihan Lokey
The main advantage of trading using opposite Visa and Houlihan Lokey positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| Houlihan Lokey vs. Lazard | Houlihan Lokey vs. PJT Partners | Houlihan Lokey vs. Moelis Co | Houlihan Lokey vs. Piper Sandler Companies |
Check out your portfolio center.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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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