Correlation Between Herc Holdings and FlexShopper

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

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

Diversification Opportunities for Herc Holdings and FlexShopper

0.34

Correlation Coefficient

Herc Holdings  FlexShopper

Weak diversification

The 3 months correlation between Herc and FlexShopper is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and FlexShopper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShopper 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 FlexShopper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShopper has no effect on the direction of Herc Holdings i.e., Herc Holdings and FlexShopper go up and down completely randomly.

Pair Corralation between Herc Holdings and FlexShopper

Considering the 90-day investment horizon Herc Holdings is expected to under-perform the FlexShopper. But the stock apears to be less risky and, when comparing its historical volatility, Herc Holdings is 1.86 times less risky than FlexShopper. The stock trades about -0.13 of its potential returns per unit of risk. The FlexShopper is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  161.00  in FlexShopper on December 29, 2024 and sell it today you would lose (26.00) from holding FlexShopper or give up 16.15% of portfolio value over 90 days.

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

Herc Holdings  vs.  FlexShopper

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.

FlexShopper

Risk-Adjusted Performance

Very Weak

Over the last 90 days FlexShopper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Herc Holdings and FlexShopper

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

The idea behind Herc Holdings and FlexShopper 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..