Correlation Between Houlihan Lokey and Goldman Sachs

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

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

Diversification Opportunities for Houlihan Lokey and Goldman Sachs

0.97

Correlation Coefficient

Houlihan Lokey  Goldman Sachs

Almost no diversification

The 3 months correlation between Houlihan and Goldman is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Houlihan Lokey and Goldman Sachs Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Group 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Group has no effect on the direction of Houlihan Lokey i.e., Houlihan Lokey and Goldman Sachs go up and down completely randomly.

Pair Corralation between Houlihan Lokey and Goldman Sachs

Considering the 90-day investment horizon Houlihan Lokey is expected to generate 0.85 times more return on investment than Goldman Sachs. However, Houlihan Lokey is 1.17 times less risky than Goldman Sachs. It trades about 0.19 of its potential returns per unit of risk. Goldman Sachs Group is currently generating about 0.16 per unit of risk. If you would invest  15,089  in Houlihan Lokey on September 4, 2024 and sell it today you would earn a total of  3,608  from holding Houlihan Lokey or generate 23.91% return on investment over 90 days.

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

Houlihan Lokey  vs.  Goldman Sachs Group

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.

Goldman Sachs Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Houlihan Lokey and Goldman Sachs

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

The idea behind Houlihan Lokey and Goldman Sachs 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.