Correlation Between Houlihan Lokey and Jefferies Financial

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

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

Diversification Opportunities for Houlihan Lokey and Jefferies Financial

0.31

Correlation Coefficient

Houlihan Lokey  Jefferies Financial

Weak diversification

The 3 months correlation between Houlihan and Jefferies is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Houlihan Lokey and Jefferies Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jefferies Financial and Houlihan Lokey 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 Houlihan Lokey are associated (or correlated) with Jefferies Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jefferies Financial has no effect on the direction of Houlihan Lokey i.e., Houlihan Lokey and Jefferies Financial go up and down completely randomly.

Pair Corralation between Houlihan Lokey and Jefferies Financial

Considering the 90-day investment horizon Houlihan Lokey is expected to generate 1.16 times less return on investment than Jefferies Financial. But when comparing it to its historical volatility, Houlihan Lokey is 1.12 times less risky than Jefferies Financial. It trades about 0.37 of its potential returns per unit of risk. Jefferies Financial Group is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  4,130  in Jefferies Financial Group on February 14, 2024 and sell it today you would earn a total of  471.00  from holding Jefferies Financial Group or generate 11.4% return on investment over 90 days.

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

Houlihan Lokey  vs.  Jefferies Financial Group

Houlihan Lokey

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Houlihan Lokey are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating essential indicators, Houlihan Lokey may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Jefferies Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jefferies Financial Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Jefferies Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Houlihan Lokey and Jefferies Financial

The main advantage of trading using opposite Houlihan Lokey and Jefferies Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Houlihan Lokey position performs unexpectedly, Jefferies Financial 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 Jefferies Financial will offset losses from the drop in Jefferies Financial's long position.

The idea behind Houlihan Lokey and Jefferies Financial Group 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.