Correlation Between Herc Holdings and AerCap Holdings

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

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

Diversification Opportunities for Herc Holdings and AerCap Holdings

-0.66

Correlation Coefficient

Herc Holdings  AerCap Holdings

Excellent diversification

The 3 months correlation between Herc and AerCap is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and AerCap Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerCap Holdings NV and Herc Holdings 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 Herc Holdings are associated (or correlated) with AerCap Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerCap Holdings NV has no effect on the direction of Herc Holdings i.e., Herc Holdings and AerCap Holdings go up and down completely randomly.

Pair Corralation between Herc Holdings and AerCap Holdings

Considering the 90-day investment horizon Herc Holdings is expected to under-perform the AerCap Holdings. In addition to that, Herc Holdings is 2.33 times more volatile than AerCap Holdings NV. It trades about -0.13 of its total potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.1 per unit of volatility. If you would invest  9,523  in AerCap Holdings NV on December 27, 2024 and sell it today you would earn a total of  771.00  from holding AerCap Holdings NV or generate 8.1% return on investment over 90 days.

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

Herc Holdings  vs.  AerCap Holdings NV

Herc Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Herc Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

AerCap Holdings NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, AerCap Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Herc Holdings and AerCap Holdings

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

The idea behind Herc Holdings and AerCap Holdings NV 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.