Correlation Between Herc Holdings and ARCA Japan
Can any of the company-specific risk be diversified away by investing in both Herc Holdings and ARCA Japan 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 ARCA Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Herc Holdings and ARCA Japan, you can compare the effects of market volatilities on Herc Holdings and ARCA Japan 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 ARCA Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herc Holdings and ARCA Japan.
Diversification Opportunities for Herc Holdings and ARCA Japan
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Herc and ARCA is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and ARCA Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARCA Japan 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 ARCA Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARCA Japan has no effect on the direction of Herc Holdings i.e., Herc Holdings and ARCA Japan go up and down completely randomly.
Pair Corralation between Herc Holdings and ARCA Japan
Considering the 90-day investment horizon Herc Holdings is expected to generate 1.93 times more return on investment than ARCA Japan. However, Herc Holdings is 1.93 times more volatile than ARCA Japan. It trades about 0.1 of its potential returns per unit of risk. ARCA Japan is currently generating about 0.05 per unit of risk. If you would invest 13,004 in Herc Holdings on September 4, 2024 and sell it today you would earn a total of 9,865 from holding Herc Holdings or generate 75.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.57% |
| Values | Daily Returns |
Herc Holdings vs. ARCA Japan
Performance |
| Timeline |
Herc Holdings and ARCA Japan Volatility Contrast
Predicted Return Density |
| Returns |
Herc Holdings
Pair trading matchups for Herc Holdings
ARCA Japan
Pair trading matchups for ARCA Japan
Pair Trading with Herc Holdings and ARCA Japan
The main advantage of trading using opposite Herc Holdings and ARCA Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herc Holdings position performs unexpectedly, ARCA Japan 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 ARCA Japan will offset losses from the drop in ARCA Japan'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 |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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