Correlation Between Herc Holdings and LanzaTech Global

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

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

Diversification Opportunities for Herc Holdings and LanzaTech Global

-0.38

Correlation Coefficient

Herc Holdings  LanzaTech Global

Very good diversification

The 3 months correlation between Herc and LanzaTech is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and LanzaTech Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LanzaTech Global 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 LanzaTech Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LanzaTech Global has no effect on the direction of Herc Holdings i.e., Herc Holdings and LanzaTech Global go up and down completely randomly.

Pair Corralation between Herc Holdings and LanzaTech Global

Considering the 90-day investment horizon Herc Holdings is expected to under-perform the LanzaTech Global. But the stock apears to be less risky and, when comparing its historical volatility, Herc Holdings is 8.51 times less risky than LanzaTech Global. The stock trades about -0.49 of its potential returns per unit of risk. The LanzaTech Global is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  9.00  in LanzaTech Global on October 10, 2024 and sell it today you would earn a total of  24.00  from holding LanzaTech Global or generate 266.67% return on investment over 90 days.

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

Herc Holdings  vs.  LanzaTech Global

Herc Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

LanzaTech Global

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LanzaTech Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, LanzaTech Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Herc Holdings and LanzaTech Global

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

The idea behind Herc Holdings and LanzaTech Global 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.

Check out your portfolio center.

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.