Correlation Between Hertz Global and Custom Truck

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

By analyzing existing cross correlation between Hertz Global Holdings and Custom Truck One, you can compare the effects of market volatilities on Hertz Global and Custom Truck 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 Hertz Global with a short position of Custom Truck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hertz Global and Custom Truck.

Diversification Opportunities for Hertz Global and Custom Truck

0.64

Correlation Coefficient

Hertz Global  Custom Truck

Poor diversification

The 3 months correlation between Hertz and Custom is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and Custom Truck One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Custom Truck One and Hertz Global 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 Hertz Global Holdings are associated (or correlated) with Custom Truck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Custom Truck One has no effect on the direction of Hertz Global i.e., Hertz Global and Custom Truck go up and down completely randomly.

Pair Corralation between Hertz Global and Custom Truck

Considering the 90-day investment horizon Hertz Global Holdings is expected to generate 1.17 times more return on investment than Custom Truck. However, Hertz Global is 1.17 times more volatile than Custom Truck One. It trades about 0.02 of its potential returns per unit of risk. Custom Truck One is currently generating about -0.14 per unit of risk. If you would invest  425.00  in Hertz Global Holdings on November 28, 2024 and sell it today you would lose (1.00) from holding Hertz Global Holdings or give up 0.24% of portfolio value over 90 days.

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

Hertz Global Holdings  vs.  Custom Truck One

Hertz Global Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hertz Global Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Custom Truck One

Risk-Adjusted Performance

Very Weak

Over the last 90 days Custom Truck One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Hertz Global and Custom Truck

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

The idea behind Hertz Global Holdings and Custom Truck One 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.