Correlation Between FTAI Aviation and Herc Holdings
Can any of the company-specific risk be diversified away by investing in both FTAI Aviation 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 FTAI Aviation and Herc Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FTAI Aviation Ltd and Herc Holdings, you can compare the effects of market volatilities on FTAI Aviation 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 FTAI Aviation with a short position of Herc Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of FTAI Aviation and Herc Holdings.
Diversification Opportunities for FTAI Aviation and Herc Holdings
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between FTAI and Herc is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding FTAI Aviation Ltd and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and FTAI Aviation 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 FTAI Aviation Ltd 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 FTAI Aviation i.e., FTAI Aviation and Herc Holdings go up and down completely randomly.
Pair Corralation between FTAI Aviation and Herc Holdings
Assuming the 90 days horizon FTAI Aviation is expected to generate 2.22 times less return on investment than Herc Holdings. But when comparing it to its historical volatility, FTAI Aviation Ltd is 2.24 times less risky than Herc Holdings. It trades about 0.05 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 12,678 in Herc Holdings on August 23, 2024 and sell it today you would earn a total of 9,098 from holding Herc Holdings or generate 71.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 86.9% |
| Values | Daily Returns |
FTAI Aviation Ltd vs. Herc Holdings
Performance |
| Timeline |
| FTAI Aviation |
| Herc Holdings |
FTAI Aviation and Herc Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FTAI Aviation and Herc Holdings
The main advantage of trading using opposite FTAI Aviation and Herc Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FTAI Aviation 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.| FTAI Aviation vs. Braskem SA Class | FTAI Aviation vs. Analog Devices | FTAI Aviation vs. Sealed Air | FTAI Aviation vs. Western Digital |
| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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