Correlation Between Herc Holdings and Gatos Silver

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

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

Diversification Opportunities for Herc Holdings and Gatos Silver

0.34

Correlation Coefficient

Herc Holdings  Gatos Silver

Weak diversification

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

Pair Corralation between Herc Holdings and Gatos Silver

Considering the 90-day investment horizon Herc Holdings is expected to generate 0.76 times more return on investment than Gatos Silver. However, Herc Holdings is 1.32 times less risky than Gatos Silver. It trades about 0.16 of its potential returns per unit of risk. Gatos Silver is currently generating about 0.05 per unit of risk. 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

Herc Holdings  vs.  Gatos Silver

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.

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.

Pair Trading with Herc Holdings and Gatos Silver

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

The idea behind Herc Holdings and Gatos Silver 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.