Correlation Between Herc Holdings and UNITED

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

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

Diversification Opportunities for Herc Holdings and UNITED

-0.2

Correlation Coefficient

Herc Holdings  UNITED

Good diversification

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

Pair Corralation between Herc Holdings and UNITED

Considering the 90-day investment horizon Herc Holdings is expected to generate 0.74 times more return on investment than UNITED. However, Herc Holdings is 1.35 times less risky than UNITED. It trades about 0.0 of its potential returns per unit of risk. UNITED TECHNOLOGIES P is currently generating about 0.0 per unit of risk. If you would invest  21,391  in Herc Holdings on October 27, 2024 and sell it today you would lose (517.00) from holding Herc Holdings or give up 2.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.33%
Values	Daily Returns

Herc Holdings  vs.  UNITED TECHNOLOGIES P

Herc Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Herc Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Herc Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

UNITED TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Herc Holdings and UNITED

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

The idea behind Herc Holdings and UNITED TECHNOLOGIES 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.