Correlation Between Hertz Global and NORFOLK

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

Diversification Opportunities for Hertz Global and NORFOLK

0.07
  Correlation Coefficient

Significant diversification

The 3 months correlation between Hertz and NORFOLK is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and NORFOLK SOUTHN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORFOLK SOUTHN P 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 NORFOLK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORFOLK SOUTHN P has no effect on the direction of Hertz Global i.e., Hertz Global and NORFOLK go up and down completely randomly.

Pair Corralation between Hertz Global and NORFOLK

Considering the 90-day investment horizon Hertz Global Holdings is expected to generate 50.58 times more return on investment than NORFOLK. However, Hertz Global is 50.58 times more volatile than NORFOLK SOUTHN P. It trades about 0.09 of its potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about 0.08 per unit of risk. If you would invest  306.00  in Hertz Global Holdings on September 26, 2024 and sell it today you would earn a total of  44.00  from holding Hertz Global Holdings or generate 14.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.12%
ValuesDaily Returns

Hertz Global Holdings  vs.  NORFOLK SOUTHN P

 Performance 
       Timeline  
Hertz Global Holdings 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Holdings are ranked lower than 3 (%) 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.
NORFOLK SOUTHN P 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NORFOLK SOUTHN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NORFOLK is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Hertz Global and NORFOLK Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hertz Global and NORFOLK

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

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