Correlation Between Herc Holdings and Alta Equipment
Can any of the company-specific risk be diversified away by investing in both Herc Holdings and Alta Equipment 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 Herc Holdings and Alta Equipment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Herc Holdings and Alta Equipment Group, you can compare the effects of market volatilities on Herc Holdings and Alta Equipment 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 Herc Holdings with a short position of Alta Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herc Holdings and Alta Equipment.
Diversification Opportunities for Herc Holdings and Alta Equipment
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Herc and Alta is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and Alta Equipment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alta Equipment Group and Herc Holdings 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 Herc Holdings are associated (or correlated) with Alta Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alta Equipment Group has no effect on the direction of Herc Holdings i.e., Herc Holdings and Alta Equipment go up and down completely randomly.
Pair Corralation between Herc Holdings and Alta Equipment
Considering the 90-day investment horizon Herc Holdings is expected to generate 0.66 times more return on investment than Alta Equipment. However, Herc Holdings is 1.53 times less risky than Alta Equipment. It trades about 0.08 of its potential returns per unit of risk. Alta Equipment Group is currently generating about -0.02 per unit of risk. If you would invest 15,717 in Herc Holdings on August 27, 2024 and sell it today you would earn a total of 6,575 from holding Herc Holdings or generate 41.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Herc Holdings vs. Alta Equipment Group
Performance |
| Timeline |
| Herc Holdings |
| Alta Equipment Group |
Herc Holdings and Alta Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Herc Holdings and Alta Equipment
The main advantage of trading using opposite Herc Holdings and Alta Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herc Holdings position performs unexpectedly, Alta Equipment 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 Alta Equipment will offset losses from the drop in Alta Equipment's long position.| Herc Holdings vs. PROG Holdings | Herc Holdings vs. McGrath RentCorp | Herc Holdings vs. Mega Matrix Corp | Herc Holdings vs. FTAI Aviation Ltd |
| Alta Equipment vs. PROG Holdings | Alta Equipment vs. McGrath RentCorp | Alta Equipment vs. Mega Matrix Corp | Alta Equipment vs. FTAI Aviation Ltd |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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