Correlation Between Hertz Global and Verde Clean

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

Diversification Opportunities for Hertz Global and Verde Clean

-0.41

Correlation Coefficient

Hertz Global  Verde Clean

Very good diversification

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

Pair Corralation between Hertz Global and Verde Clean

Assuming the 90 days horizon Hertz Global is expected to generate 1.56 times less return on investment than Verde Clean. But when comparing it to its historical volatility, Hertz Global Hldgs is 1.99 times less risky than Verde Clean. It trades about 0.1 of its potential returns per unit of risk. Verde Clean Fuels is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  26.00  in Verde Clean Fuels on October 23, 2024 and sell it today you would earn a total of  5.00  from holding Verde Clean Fuels or generate 19.23% return on investment over 90 days.

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

Hertz Global Hldgs  vs.  Verde Clean Fuels

Hertz Global Hldgs

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Hldgs are ranked lower than 7 (%) 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.

Verde Clean Fuels

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Verde Clean Fuels are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Verde Clean showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hertz Global and Verde Clean

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

The idea behind Hertz Global Hldgs and Verde Clean Fuels 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 Stocks Directory module to find actively traded stocks across global markets.