Correlation Between Herc Holdings and NextTrip

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

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

Diversification Opportunities for Herc Holdings and NextTrip

-0.2

Correlation Coefficient

Herc Holdings  NextTrip

Good diversification

The 3 months correlation between Herc and NextTrip is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and NextTrip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextTrip 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 NextTrip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextTrip has no effect on the direction of Herc Holdings i.e., Herc Holdings and NextTrip go up and down completely randomly.

Pair Corralation between Herc Holdings and NextTrip

Considering the 90-day investment horizon Herc Holdings is expected to under-perform the NextTrip. But the stock apears to be less risky and, when comparing its historical volatility, Herc Holdings is 4.43 times less risky than NextTrip. The stock trades about -0.46 of its potential returns per unit of risk. The NextTrip is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  418.00  in NextTrip on October 10, 2024 and sell it today you would earn a total of  307.00  from holding NextTrip or generate 73.44% 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.  NextTrip

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.

NextTrip

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NextTrip are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, NextTrip reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Herc Holdings and NextTrip

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

The idea behind Herc Holdings and NextTrip 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.