Correlation Between Stratasys and Herc Holdings

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

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

Diversification Opportunities for Stratasys and Herc Holdings

0.38

Correlation Coefficient

Stratasys  Herc Holdings

Weak diversification

The 3 months correlation between Stratasys and Herc is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Stratasys and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and Stratasys 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 Stratasys 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 Stratasys i.e., Stratasys and Herc Holdings go up and down completely randomly.

Pair Corralation between Stratasys and Herc Holdings

Given the investment horizon of 90 days Stratasys is expected to generate 1.68 times more return on investment than Herc Holdings. However, Stratasys is 1.68 times more volatile than Herc Holdings. It trades about -0.23 of its potential returns per unit of risk. Herc Holdings is currently generating about -0.42 per unit of risk. If you would invest  1,034  in Stratasys on October 12, 2024 and sell it today you would lose (134.00) from holding Stratasys or give up 12.96% of portfolio value over 90 days.

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

Stratasys  vs.  Herc Holdings

Stratasys

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stratasys are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Stratasys unveiled solid returns over the last few months and may actually be approaching a breakup point.

Herc Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Stratasys and Herc Holdings

The main advantage of trading using opposite Stratasys and Herc Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stratasys 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 Stratasys 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.