Correlation Between BCE and Hertz Global

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

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

Diversification Opportunities for BCE and Hertz Global

-0.53

Correlation Coefficient

BCE  Hertz Global

Excellent diversification

The 3 months correlation between BCE and Hertz is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Hertz Global Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hertz Global Holdings and BCE 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 BCE Inc are associated (or correlated) with Hertz Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hertz Global Holdings has no effect on the direction of BCE i.e., BCE and Hertz Global go up and down completely randomly.

Pair Corralation between BCE and Hertz Global

Considering the 90-day investment horizon BCE is expected to generate 116.81 times less return on investment than Hertz Global. But when comparing it to its historical volatility, BCE Inc is 2.78 times less risky than Hertz Global. It trades about 0.01 of its potential returns per unit of risk. Hertz Global Holdings is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  342.00  in Hertz Global Holdings on October 21, 2024 and sell it today you would earn a total of  61.00  from holding Hertz Global Holdings or generate 17.84% return on investment over 90 days.

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

BCE Inc  vs.  Hertz Global Holdings

BCE Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Hertz Global Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hertz Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BCE and Hertz Global

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

The idea behind BCE Inc and Hertz Global Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.