Correlation Between China Aircraft and Herc Holdings
Can any of the company-specific risk be diversified away by investing in both China Aircraft 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 China Aircraft and Herc Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Aircraft Leasing and Herc Holdings, you can compare the effects of market volatilities on China Aircraft 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 China Aircraft with a short position of Herc Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Aircraft and Herc Holdings.
Diversification Opportunities for China Aircraft and Herc Holdings
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between China and Herc is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding China Aircraft Leasing and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and China Aircraft 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 China Aircraft Leasing 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 China Aircraft i.e., China Aircraft and Herc Holdings go up and down completely randomly.
Pair Corralation between China Aircraft and Herc Holdings
Assuming the 90 days horizon China Aircraft Leasing is expected to generate 1.83 times more return on investment than Herc Holdings. However, China Aircraft is 1.83 times more volatile than Herc Holdings. It trades about 0.13 of its potential returns per unit of risk. Herc Holdings is currently generating about 0.13 per unit of risk. If you would invest 19.00 in China Aircraft Leasing on August 24, 2024 and sell it today you would earn a total of 21.00 from holding China Aircraft Leasing or generate 110.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Aircraft Leasing vs. Herc Holdings
Performance |
| Timeline |
| China Aircraft Leasing |
| Herc Holdings |
China Aircraft and Herc Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Aircraft and Herc Holdings
The main advantage of trading using opposite China Aircraft and Herc Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Aircraft 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.| China Aircraft vs. United Rentals | China Aircraft vs. Ashtead Gro | China Aircraft vs. AerCap Holdings NV | China Aircraft vs. Fortress Transp Infra |
| Herc Holdings vs. HE Equipment Services | Herc Holdings vs. Air Lease | Herc Holdings vs. Aquagold International | Herc Holdings vs. Small Cap Core |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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