Correlation Between Hertz Global and Reservoir Media
Can any of the company-specific risk be diversified away by investing in both Hertz Global and Reservoir Media 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 Reservoir Media 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 Reservoir Media, you can compare the effects of market volatilities on Hertz Global and Reservoir Media 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 Reservoir Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hertz Global and Reservoir Media.
Diversification Opportunities for Hertz Global and Reservoir Media
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hertz and Reservoir is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media 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 Reservoir Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reservoir Media has no effect on the direction of Hertz Global i.e., Hertz Global and Reservoir Media go up and down completely randomly.
Pair Corralation between Hertz Global and Reservoir Media
Considering the 90-day investment horizon Hertz Global Holdings is expected to under-perform the Reservoir Media. In addition to that, Hertz Global is 1.37 times more volatile than Reservoir Media. It trades about -0.25 of its total potential returns per unit of risk. Reservoir Media is currently generating about -0.14 per unit of volatility. If you would invest 930.00 in Reservoir Media on October 6, 2024 and sell it today you would lose (81.00) from holding Reservoir Media or give up 8.71% 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. Reservoir Media
Performance |
Timeline |
Hertz Global Holdings |
Reservoir Media |
Hertz Global and Reservoir Media Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hertz Global and Reservoir Media
The main advantage of trading using opposite Hertz Global and Reservoir Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hertz Global position performs unexpectedly, Reservoir Media 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 Reservoir Media will offset losses from the drop in Reservoir Media's long position.Hertz Global vs. United Rentals | Hertz Global vs. Ryder System | Hertz Global vs. Herc Holdings | Hertz Global vs. Hertz Global Hldgs |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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