Correlation Between Lees Pharmaceutical and Herc Holdings

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

By analyzing existing cross correlation between Lees Pharmaceutical Holdings and Herc Holdings, you can compare the effects of market volatilities on Lees Pharmaceutical and Herc Holdings 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 Lees Pharmaceutical with a short position of Herc Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lees Pharmaceutical and Herc Holdings.

Diversification Opportunities for Lees Pharmaceutical and Herc Holdings

-0.17

Correlation Coefficient

Lees Pharmaceutical  Herc Holdings

Good diversification

The 3 months correlation between Lees and Herc is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lees Pharmaceutical Holdings and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and Lees Pharmaceutical 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 Lees Pharmaceutical Holdings are associated (or correlated) with Herc Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herc Holdings has no effect on the direction of Lees Pharmaceutical i.e., Lees Pharmaceutical and Herc Holdings go up and down completely randomly.

Pair Corralation between Lees Pharmaceutical and Herc Holdings

If you would invest  11,147  in Herc Holdings on October 5, 2024 and sell it today you would earn a total of  7,695  from holding Herc Holdings or generate 69.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.32%
Values	Daily Returns

Lees Pharmaceutical Holdings  vs.  Herc Holdings

Lees Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lees Pharmaceutical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lees Pharmaceutical is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Herc Holdings

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lees Pharmaceutical and Herc Holdings

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

The idea behind Lees Pharmaceutical Holdings and Herc Holdings 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.