Correlation Between RELIANCE and Hertz Global

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

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

Diversification Opportunities for RELIANCE and Hertz Global

0.16

Correlation Coefficient

RELIANCE  Hertz Global

Average diversification

The 3 months correlation between RELIANCE and Hertz is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding RELIANCE STL ALUM and Hertz Global Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hertz Global Holdings and RELIANCE 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 RELIANCE STL ALUM are associated (or correlated) with Hertz Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hertz Global Holdings has no effect on the direction of RELIANCE i.e., RELIANCE and Hertz Global go up and down completely randomly.

Pair Corralation between RELIANCE and Hertz Global

Assuming the 90 days trading horizon RELIANCE STL ALUM is expected to generate 0.55 times more return on investment than Hertz Global. However, RELIANCE STL ALUM is 1.8 times less risky than Hertz Global. It trades about -0.37 of its potential returns per unit of risk. Hertz Global Holdings is currently generating about -0.36 per unit of risk. If you would invest  11,197  in RELIANCE STL ALUM on September 29, 2024 and sell it today you would lose (367.00) from holding RELIANCE STL ALUM or give up 3.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	20.0%
Values	Daily Returns

RELIANCE STL ALUM  vs.  Hertz Global Holdings

RELIANCE STL ALUM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RELIANCE STL ALUM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for RELIANCE STL ALUM investors.

Hertz Global Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Holdings are ranked lower than 4 (%) 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.

Pair Trading with RELIANCE and Hertz Global

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

The idea behind RELIANCE STL ALUM and Hertz Global 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.