Correlation Between Ford and Hertz Global
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Hertz Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Hertz Global Hldgs, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Hertz Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Hertz Global.
Diversification Opportunities for Ford and Hertz Global
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Hertz is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hertz Global Hldgs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hertz Global Hldgs and Ford 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 Ford Motor 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 Hldgs has no effect on the direction of Ford i.e., Ford and Hertz Global go up and down completely randomly.
Pair Corralation between Ford and Hertz Global
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Hertz Global. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.4 times less risky than Hertz Global. The stock trades about 0.0 of its potential returns per unit of risk. The Hertz Global Hldgs is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 190.00 in Hertz Global Hldgs on August 24, 2024 and sell it today you would earn a total of 30.00 from holding Hertz Global Hldgs or generate 15.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Hertz Global Hldgs
Performance |
| Timeline |
| Ford Motor |
| Hertz Global Hldgs |
Ford and Hertz Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Hertz Global
The main advantage of trading using opposite Ford and Hertz Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor and Hertz Global Hldgs 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.| Hertz Global vs. Hertz Global Holdings | Hertz Global vs. Avis Budget Group | Hertz Global vs. Herc Holdings | Hertz Global vs. Frontier Group Holdings |
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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