Correlation Between Herc Holdings and GameStop Corp
Can any of the company-specific risk be diversified away by investing in both Herc Holdings and GameStop Corp 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 GameStop Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Herc Holdings and GameStop Corp, you can compare the effects of market volatilities on Herc Holdings and GameStop Corp 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 GameStop Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herc Holdings and GameStop Corp.
Diversification Opportunities for Herc Holdings and GameStop Corp
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Herc and GameStop is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp 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 GameStop Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GameStop Corp has no effect on the direction of Herc Holdings i.e., Herc Holdings and GameStop Corp go up and down completely randomly.
Pair Corralation between Herc Holdings and GameStop Corp
Considering the 90-day investment horizon Herc Holdings is expected to generate 0.41 times more return on investment than GameStop Corp. However, Herc Holdings is 2.42 times less risky than GameStop Corp. It trades about 0.15 of its potential returns per unit of risk. GameStop Corp is currently generating about 0.04 per unit of risk. If you would invest 13,658 in Herc Holdings on September 1, 2024 and sell it today you would earn a total of 9,542 from holding Herc Holdings or generate 69.86% 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. GameStop Corp
Performance |
| Timeline |
| Herc Holdings |
| GameStop Corp |
Herc Holdings and GameStop Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Herc Holdings and GameStop Corp
The main advantage of trading using opposite Herc Holdings and GameStop Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herc Holdings position performs unexpectedly, GameStop Corp 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 GameStop Corp will offset losses from the drop in GameStop Corp's long position.| Herc Holdings vs. McGrath RentCorp | Herc Holdings vs. Alta Equipment Group | Herc Holdings vs. Custom Truck One | Herc Holdings vs. GATX Corporation |
| GameStop Corp vs. RH | GameStop Corp vs. Dicks Sporting Goods | GameStop Corp vs. Best Buy Co | GameStop Corp vs. AutoZone |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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