Correlation Between Custom Truck and Hertz Global

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

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

Diversification Opportunities for Custom Truck and Hertz Global

0.83

Correlation Coefficient

Custom Truck  Hertz Global

Very poor diversification

The 3 months correlation between Custom and Hertz is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Custom Truck One 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 Custom Truck 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 Custom Truck One 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 Custom Truck i.e., Custom Truck and Hertz Global go up and down completely randomly.

Pair Corralation between Custom Truck and Hertz Global

Given the investment horizon of 90 days Custom Truck One is expected to generate 0.81 times more return on investment than Hertz Global. However, Custom Truck One is 1.23 times less risky than Hertz Global. It trades about 0.15 of its potential returns per unit of risk. Hertz Global Holdings is currently generating about 0.07 per unit of risk. If you would invest  385.00  in Custom Truck One on September 17, 2024 and sell it today you would earn a total of  134.00  from holding Custom Truck One or generate 34.81% return on investment over 90 days.

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

Custom Truck One  vs.  Hertz Global Holdings

Custom Truck One

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Custom Truck One are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Custom Truck unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hertz Global Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Holdings are ranked lower than 5 (%) 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 Custom Truck and Hertz Global

The main advantage of trading using opposite Custom Truck and Hertz Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Custom Truck 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 Custom Truck One 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.