Correlation Between Compania Cervecerias and Herc Holdings

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

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

Diversification Opportunities for Compania Cervecerias and Herc Holdings

-0.12

Correlation Coefficient

Compania Cervecerias  Herc Holdings

Good diversification

The 3 months correlation between Compania and Herc is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and Compania Cervecerias 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 Compania Cervecerias Unidas are associated (or correlated) with Herc Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herc Holdings has no effect on the direction of Compania Cervecerias i.e., Compania Cervecerias and Herc Holdings go up and down completely randomly.

Pair Corralation between Compania Cervecerias and Herc Holdings

Considering the 90-day investment horizon Compania Cervecerias is expected to generate 34.64 times less return on investment than Herc Holdings. But when comparing it to its historical volatility, Compania Cervecerias Unidas is 1.86 times less risky than Herc Holdings. It trades about 0.0 of its potential returns per unit of risk. Herc Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12,961  in Herc Holdings on October 13, 2024 and sell it today you would earn a total of  4,934  from holding Herc Holdings or generate 38.07% return on investment over 90 days.

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

Compania Cervecerias Unidas  vs.  Herc Holdings

Compania Cervecerias

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Cervecerias Unidas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Compania Cervecerias is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Herc Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Compania Cervecerias and Herc Holdings

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

The idea behind Compania Cervecerias Unidas and Herc 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.