Correlation Between Hertz Global and PHINIA

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

By analyzing existing cross correlation between Hertz Global Hldgs and PHINIA Inc, you can compare the effects of market volatilities on Hertz Global and PHINIA 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 PHINIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hertz Global and PHINIA.

Diversification Opportunities for Hertz Global and PHINIA

0.3

Correlation Coefficient

Hertz Global  PHINIA

Weak diversification

The 3 months correlation between Hertz and PHINIA is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Hldgs and PHINIA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHINIA Inc 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 Hldgs are associated (or correlated) with PHINIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHINIA Inc has no effect on the direction of Hertz Global i.e., Hertz Global and PHINIA go up and down completely randomly.

Pair Corralation between Hertz Global and PHINIA

Assuming the 90 days horizon Hertz Global Hldgs is expected to generate 1.85 times more return on investment than PHINIA. However, Hertz Global is 1.85 times more volatile than PHINIA Inc. It trades about 0.03 of its potential returns per unit of risk. PHINIA Inc is currently generating about -0.06 per unit of risk. If you would invest  197.00  in Hertz Global Hldgs on December 19, 2024 and sell it today you would earn a total of  3.00  from holding Hertz Global Hldgs or generate 1.52% return on investment over 90 days.

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

Hertz Global Hldgs  vs.  PHINIA Inc

Hertz Global Hldgs

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Hldgs are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hertz Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PHINIA Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days PHINIA Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Hertz Global and PHINIA

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

The idea behind Hertz Global Hldgs and PHINIA Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.