Correlation Between Herc Holdings and National CineMedia

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

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

Diversification Opportunities for Herc Holdings and National CineMedia

0.37

Correlation Coefficient

Herc Holdings  National CineMedia

Weak diversification

The 3 months correlation between Herc and National is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia 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 National CineMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National CineMedia has no effect on the direction of Herc Holdings i.e., Herc Holdings and National CineMedia go up and down completely randomly.

Pair Corralation between Herc Holdings and National CineMedia

Considering the 90-day investment horizon Herc Holdings is expected to generate 0.86 times more return on investment than National CineMedia. However, Herc Holdings is 1.17 times less risky than National CineMedia. It trades about -0.42 of its potential returns per unit of risk. National CineMedia is currently generating about -0.45 per unit of risk. If you would invest  20,968  in Herc Holdings on October 12, 2024 and sell it today you would lose (2,776) from holding Herc Holdings or give up 13.24% 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.  National CineMedia

Herc Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

National CineMedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National CineMedia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's primary indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Herc Holdings and National CineMedia

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

The idea behind Herc Holdings and National CineMedia 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.