Correlation Between Radcom and Herc Holdings

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

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

Diversification Opportunities for Radcom and Herc Holdings

0.5

Correlation Coefficient

Radcom  Herc Holdings

Very weak diversification

The 3 months correlation between Radcom and Herc is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Radcom and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and Radcom 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 Radcom 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 Radcom i.e., Radcom and Herc Holdings go up and down completely randomly.

Pair Corralation between Radcom and Herc Holdings

Given the investment horizon of 90 days Radcom is expected to generate 1.18 times more return on investment than Herc Holdings. However, Radcom is 1.18 times more volatile than Herc Holdings. It trades about 0.01 of its potential returns per unit of risk. Herc Holdings is currently generating about -0.19 per unit of risk. If you would invest  1,197  in Radcom on December 17, 2024 and sell it today you would lose (15.00) from holding Radcom or give up 1.25% of portfolio value over 90 days.

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

Radcom  vs.  Herc Holdings

Radcom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Radcom is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Herc Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Herc Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Radcom and Herc Holdings

The main advantage of trading using opposite Radcom and Herc Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radcom 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 Radcom 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.

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 Anywhere module to track or share privately all of your investments from the convenience of any device.