Correlation Between Hertz Global and Global Ship

Can any of the company-specific risk be diversified away by investing in both Hertz Global and Global Ship 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 Global Ship 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 Global Ship Lease, you can compare the effects of market volatilities on Hertz Global and Global Ship 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 Global Ship. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hertz Global and Global Ship.

Diversification Opportunities for Hertz Global and Global Ship

-0.03

Correlation Coefficient

Hertz Global  Global Ship

Good diversification

The 3 months correlation between Hertz and Global is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and Global Ship Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Ship Lease 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 Global Ship. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Ship Lease has no effect on the direction of Hertz Global i.e., Hertz Global and Global Ship go up and down completely randomly.

Pair Corralation between Hertz Global and Global Ship

Considering the 90-day investment horizon Hertz Global Holdings is expected to under-perform the Global Ship. In addition to that, Hertz Global is 5.72 times more volatile than Global Ship Lease. It trades about -0.36 of its total potential returns per unit of risk. Global Ship Lease is currently generating about 0.06 per unit of volatility. If you would invest  2,582  in Global Ship Lease on September 29, 2024 and sell it today you would earn a total of  20.00  from holding Global Ship Lease or generate 0.77% return on investment over 90 days.

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

Hertz Global Holdings  vs.  Global Ship Lease

Hertz Global Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hertz Global showed solid returns over the last few months and may actually be approaching a breakup point.

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hertz Global and Global Ship

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

The idea behind Hertz Global Holdings and Global Ship Lease 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.