Correlation Between Gatos Silver and Herc Holdings

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

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

Diversification Opportunities for Gatos Silver and Herc Holdings

0.34

Correlation Coefficient

Gatos Silver  Herc Holdings

Weak diversification

The 3 months correlation between Gatos and Herc is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Gatos Silver and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and Gatos Silver 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 Gatos Silver 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 Gatos Silver i.e., Gatos Silver and Herc Holdings go up and down completely randomly.

Pair Corralation between Gatos Silver and Herc Holdings

Given the investment horizon of 90 days Gatos Silver is expected to generate 2.39 times less return on investment than Herc Holdings. In addition to that, Gatos Silver is 1.32 times more volatile than Herc Holdings. It trades about 0.05 of its total potential returns per unit of risk. Herc Holdings is currently generating about 0.16 per unit of volatility. If you would invest  19,145  in Herc Holdings on October 25, 2024 and sell it today you would earn a total of  1,459  from holding Herc Holdings or generate 7.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.95%
Values	Daily Returns

Gatos Silver  vs.  Herc Holdings

Gatos Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gatos Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Herc Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Herc Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Herc Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Gatos Silver and Herc Holdings

The main advantage of trading using opposite Gatos Silver and Herc Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gatos Silver 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 Gatos Silver 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.