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 Hldgs, 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

0.71

Correlation Coefficient

Custom Truck  Hertz Global

Poor diversification

The 3 months correlation between Custom and Hertz is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Custom Truck One and Hertz Global Hldgs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hertz Global Hldgs 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 Hldgs 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 under-perform the Hertz Global. But the stock apears to be less risky and, when comparing its historical volatility, Custom Truck One is 1.59 times less risky than Hertz Global. The stock trades about -0.36 of its potential returns per unit of risk. The Hertz Global Hldgs is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  274.00  in Hertz Global Hldgs on October 10, 2024 and sell it today you would lose (44.00) from holding Hertz Global Hldgs or give up 16.06% of portfolio value over 90 days.

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

Custom Truck One  vs.  Hertz Global Hldgs

Custom Truck One

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Custom Truck One are ranked lower than 14 (%) 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 Hldgs

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Hldgs 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 Hldgs 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.