Correlation Between Herc Holdings and CARPENTER

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

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

Diversification Opportunities for Herc Holdings and CARPENTER

-0.32

Correlation Coefficient

Herc Holdings  CARPENTER

Very good diversification

The 3 months correlation between Herc and CARPENTER is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and CARPENTER TECHNOLOGY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARPENTER TECHNOLOGY 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 CARPENTER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARPENTER TECHNOLOGY has no effect on the direction of Herc Holdings i.e., Herc Holdings and CARPENTER go up and down completely randomly.

Pair Corralation between Herc Holdings and CARPENTER

Considering the 90-day investment horizon Herc Holdings is expected to generate 5.15 times more return on investment than CARPENTER. However, Herc Holdings is 5.15 times more volatile than CARPENTER TECHNOLOGY P. It trades about 0.04 of its potential returns per unit of risk. CARPENTER TECHNOLOGY P is currently generating about 0.01 per unit of risk. If you would invest  13,522  in Herc Holdings on September 30, 2024 and sell it today you would earn a total of  5,440  from holding Herc Holdings or generate 40.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Herc Holdings  vs.  CARPENTER TECHNOLOGY P

Herc Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 7 (%) 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.

CARPENTER TECHNOLOGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARPENTER TECHNOLOGY P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CARPENTER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Herc Holdings and CARPENTER

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

The idea behind Herc Holdings and CARPENTER TECHNOLOGY P 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.