Correlation Between Herc Holdings and Orchestra BioMed

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

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

Diversification Opportunities for Herc Holdings and Orchestra BioMed

0.56

Correlation Coefficient

Herc Holdings  Orchestra BioMed

Very weak diversification

The 3 months correlation between Herc and Orchestra is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and Orchestra BioMed Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orchestra BioMed Holdings 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 Orchestra BioMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orchestra BioMed Holdings has no effect on the direction of Herc Holdings i.e., Herc Holdings and Orchestra BioMed go up and down completely randomly.

Pair Corralation between Herc Holdings and Orchestra BioMed

Considering the 90-day investment horizon Herc Holdings is expected to generate 0.4 times more return on investment than Orchestra BioMed. However, Herc Holdings is 2.49 times less risky than Orchestra BioMed. It trades about 0.03 of its potential returns per unit of risk. Orchestra BioMed Holdings is currently generating about 0.0 per unit of risk. If you would invest  10,924  in Herc Holdings on December 4, 2024 and sell it today you would earn a total of  2,653  from holding Herc Holdings or generate 24.29% return on investment over 90 days.

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

Herc Holdings  vs.  Orchestra BioMed Holdings

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.

Orchestra BioMed Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orchestra BioMed Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Herc Holdings and Orchestra BioMed

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

The idea behind Herc Holdings and Orchestra BioMed Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.