Correlation Between Air Lease and Herc Holdings
Can any of the company-specific risk be diversified away by investing in both Air Lease 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 Air Lease and Herc Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Lease and Herc Holdings, you can compare the effects of market volatilities on Air Lease 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 Air Lease with a short position of Herc Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and Herc Holdings.
Diversification Opportunities for Air Lease and Herc Holdings
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and Herc is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and Air Lease 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 Air Lease 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 Air Lease i.e., Air Lease and Herc Holdings go up and down completely randomly.
Pair Corralation between Air Lease and Herc Holdings
Allowing for the 90-day total investment horizon Air Lease is expected to generate 4.07 times less return on investment than Herc Holdings. But when comparing it to its historical volatility, Air Lease is 1.99 times less risky than Herc Holdings. It trades about 0.1 of its potential returns per unit of risk. Herc Holdings is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 14,639 in Herc Holdings on August 26, 2024 and sell it today you would earn a total of 7,653 from holding Herc Holdings or generate 52.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Lease vs. Herc Holdings
Performance |
| Timeline |
| Air Lease |
| Herc Holdings |
Air Lease and Herc Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Lease and Herc Holdings
The main advantage of trading using opposite Air Lease and Herc Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Lease 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.| Air Lease vs. Alta Equipment Group | Air Lease vs. McGrath RentCorp | Air Lease vs. Herc Holdings | Air Lease vs. HE Equipment Services |
| Herc Holdings vs. PROG Holdings | Herc Holdings vs. McGrath RentCorp | Herc Holdings vs. Mega Matrix Corp | Herc Holdings vs. FTAI Aviation Ltd |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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