Correlation Between Herc Holdings and NetEase
Can any of the company-specific risk be diversified away by investing in both Herc Holdings and NetEase 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 NetEase into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Herc Holdings and NetEase, you can compare the effects of market volatilities on Herc Holdings and NetEase 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 NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herc Holdings and NetEase.
Diversification Opportunities for Herc Holdings and NetEase
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Herc and NetEase is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase 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 NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of Herc Holdings i.e., Herc Holdings and NetEase go up and down completely randomly.
Pair Corralation between Herc Holdings and NetEase
Considering the 90-day investment horizon Herc Holdings is expected to generate 1.09 times more return on investment than NetEase. However, Herc Holdings is 1.09 times more volatile than NetEase. It trades about 0.27 of its potential returns per unit of risk. NetEase is currently generating about 0.08 per unit of risk. If you would invest 13,797 in Herc Holdings on September 2, 2024 and sell it today you would earn a total of 9,403 from holding Herc Holdings or generate 68.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Herc Holdings vs. NetEase
Performance |
| Timeline |
| Herc Holdings |
| NetEase |
Herc Holdings and NetEase Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Herc Holdings and NetEase
The main advantage of trading using opposite Herc Holdings and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herc Holdings position performs unexpectedly, NetEase 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 NetEase will offset losses from the drop in NetEase'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 |
| NetEase vs. Roblox Corp | NetEase vs. Skillz Platform | NetEase vs. Take Two Interactive Software | NetEase vs. Nintendo Co ADR |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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