Correlation Between Herc Holdings and American Axle
Can any of the company-specific risk be diversified away by investing in both Herc Holdings and American Axle 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 American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Herc Holdings and American Axle Manufacturing, you can compare the effects of market volatilities on Herc Holdings and American Axle 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 American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herc Holdings and American Axle.
Diversification Opportunities for Herc Holdings and American Axle
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Herc and American is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and American Axle Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Axle Manufa 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 American Axle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Axle Manufa has no effect on the direction of Herc Holdings i.e., Herc Holdings and American Axle go up and down completely randomly.
Pair Corralation between Herc Holdings and American Axle
Considering the 90-day investment horizon Herc Holdings is expected to generate 1.25 times more return on investment than American Axle. However, Herc Holdings is 1.25 times more volatile than American Axle Manufacturing. It trades about 0.25 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.05 per unit of risk. If you would invest 14,049 in Herc Holdings on August 28, 2024 and sell it today you would earn a total of 8,829 from holding Herc Holdings or generate 62.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Herc Holdings vs. American Axle Manufacturing
Performance |
| Timeline |
| Herc Holdings |
| American Axle Manufa |
Herc Holdings and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Herc Holdings and American Axle
The main advantage of trading using opposite Herc Holdings and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herc Holdings position performs unexpectedly, American Axle 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 American Axle will offset losses from the drop in American Axle'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 |
| American Axle vs. Lear Corporation | American Axle vs. Commercial Vehicle Group | American Axle vs. Adient PLC | American Axle vs. Gentex |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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