Correlation Between First Ship and Herc Holdings
Can any of the company-specific risk be diversified away by investing in both First Ship 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 First Ship and Herc Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Ship Lease and Herc Holdings, you can compare the effects of market volatilities on First Ship 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 First Ship with a short position of Herc Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Ship and Herc Holdings.
Diversification Opportunities for First Ship and Herc Holdings
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between First and Herc is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Ship Lease and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and First Ship 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 First Ship 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 First Ship i.e., First Ship and Herc Holdings go up and down completely randomly.
Pair Corralation between First Ship and Herc Holdings
Assuming the 90 days horizon First Ship is expected to generate 1.29 times less return on investment than Herc Holdings. But when comparing it to its historical volatility, First Ship Lease is 1.06 times less risky than Herc Holdings. It trades about 0.04 of its potential returns per unit of risk. Herc Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 12,275 in Herc Holdings on August 24, 2024 and sell it today you would earn a total of 9,501 from holding Herc Holdings or generate 77.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Flat |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
First Ship Lease vs. Herc Holdings
Performance |
Timeline |
First Ship Lease |
Herc Holdings |
First Ship and Herc Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Ship and Herc Holdings
The main advantage of trading using opposite First Ship and Herc Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Ship 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.First Ship vs. United Rentals | First Ship vs. Ashtead Gro | First Ship vs. AerCap Holdings NV | First Ship vs. Fortress Transp Infra |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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