Correlation Between HE Equipment and Hertz Global
Can any of the company-specific risk be diversified away by investing in both HE Equipment 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 HE Equipment and Hertz Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HE Equipment Services and Hertz Global Holdings, you can compare the effects of market volatilities on HE Equipment 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 HE Equipment with a short position of Hertz Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and Hertz Global.
Diversification Opportunities for HE Equipment and Hertz Global
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between HEES and Hertz is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Hertz Global Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hertz Global Holdings and HE Equipment 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 HE Equipment Services 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 Holdings has no effect on the direction of HE Equipment i.e., HE Equipment and Hertz Global go up and down completely randomly.
Pair Corralation between HE Equipment and Hertz Global
Given the investment horizon of 90 days HE Equipment Services is expected to generate 6.56 times more return on investment than Hertz Global. However, HE Equipment is 6.56 times more volatile than Hertz Global Holdings. It trades about 0.2 of its potential returns per unit of risk. Hertz Global Holdings is currently generating about 0.2 per unit of risk. If you would invest 4,834 in HE Equipment Services on November 2, 2024 and sell it today you would earn a total of 4,033 from holding HE Equipment Services or generate 83.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HE Equipment Services vs. Hertz Global Holdings
Performance |
| Timeline |
| HE Equipment Services |
| Hertz Global Holdings |
HE Equipment and Hertz Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HE Equipment and Hertz Global
The main advantage of trading using opposite HE Equipment and Hertz Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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.| HE Equipment vs. GATX Corporation | HE Equipment vs. McGrath RentCorp | HE Equipment vs. Alta Equipment Group | HE Equipment vs. Ryder System |
| Hertz Global vs. United Rentals | Hertz Global vs. Ryder System | Hertz Global vs. Herc Holdings | Hertz Global vs. Hertz Global Hldgs |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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