Correlation Between Hertz Global and Liberty Northwest

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

Diversification Opportunities for Hertz Global and Liberty Northwest

0.41

Correlation Coefficient

Hertz Global  Liberty Northwest

Very weak diversification

The 3 months correlation between Hertz and Liberty is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and Liberty Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Northwest Bancorp 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 Liberty Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Northwest Bancorp has no effect on the direction of Hertz Global i.e., Hertz Global and Liberty Northwest go up and down completely randomly.

Pair Corralation between Hertz Global and Liberty Northwest

Considering the 90-day investment horizon Hertz Global Holdings is expected to under-perform the Liberty Northwest. In addition to that, Hertz Global is 3.58 times more volatile than Liberty Northwest Bancorp. It trades about -0.05 of its total potential returns per unit of risk. Liberty Northwest Bancorp is currently generating about -0.02 per unit of volatility. If you would invest  640.00  in Liberty Northwest Bancorp on December 2, 2024 and sell it today you would lose (100.00) from holding Liberty Northwest Bancorp or give up 15.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.2%
Values	Daily Returns

Hertz Global Holdings  vs.  Liberty Northwest Bancorp

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.

Liberty Northwest Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Liberty Northwest Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Liberty Northwest is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Hertz Global and Liberty Northwest

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

The idea behind Hertz Global Holdings and Liberty Northwest Bancorp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.