Correlation Between Herc Holdings and Universal Technical

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

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

Diversification Opportunities for Herc Holdings and Universal Technical

0.72

Correlation Coefficient

Herc Holdings  Universal Technical

Poor diversification

The 3 months correlation between Herc and Universal is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and Universal Technical Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Technical 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 Universal Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Technical has no effect on the direction of Herc Holdings i.e., Herc Holdings and Universal Technical go up and down completely randomly.

Pair Corralation between Herc Holdings and Universal Technical

Considering the 90-day investment horizon Herc Holdings is expected to generate 1.07 times less return on investment than Universal Technical. But when comparing it to its historical volatility, Herc Holdings is 1.06 times less risky than Universal Technical. It trades about 0.22 of its potential returns per unit of risk. Universal Technical Institute is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,676  in Universal Technical Institute on September 13, 2024 and sell it today you would earn a total of  934.00  from holding Universal Technical Institute or generate 55.73% return on investment over 90 days.

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

Herc Holdings  vs.  Universal Technical Institute

Herc Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 17 (%) 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.

Universal Technical

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Technical Institute are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Universal Technical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Herc Holdings and Universal Technical

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

The idea behind Herc Holdings and Universal Technical Institute 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.