Correlation Between Herc Holdings and Frontier Group
Can any of the company-specific risk be diversified away by investing in both Herc Holdings and Frontier Group 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 Frontier Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Herc Holdings and Frontier Group Holdings, you can compare the effects of market volatilities on Herc Holdings and Frontier Group 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 Frontier Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herc Holdings and Frontier Group.
Diversification Opportunities for Herc Holdings and Frontier Group
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Herc and Frontier is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and Frontier Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Group Holdings 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 Frontier Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Group Holdings has no effect on the direction of Herc Holdings i.e., Herc Holdings and Frontier Group go up and down completely randomly.
Pair Corralation between Herc Holdings and Frontier Group
Considering the 90-day investment horizon Herc Holdings is expected to generate 0.56 times more return on investment than Frontier Group. However, Herc Holdings is 1.8 times less risky than Frontier Group. It trades about 0.15 of its potential returns per unit of risk. Frontier Group Holdings is currently generating about -0.05 per unit of risk. If you would invest 21,035 in Herc Holdings on August 31, 2024 and sell it today you would earn a total of 1,940 from holding Herc Holdings or generate 9.22% 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. Frontier Group Holdings
Performance |
| Timeline |
| Herc Holdings |
| Frontier Group Holdings |
Herc Holdings and Frontier Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Herc Holdings and Frontier Group
The main advantage of trading using opposite Herc Holdings and Frontier Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herc Holdings position performs unexpectedly, Frontier Group 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 Frontier Group will offset losses from the drop in Frontier Group'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 |
| Frontier Group vs. JetBlue Airways Corp | Frontier Group vs. Southwest Airlines | Frontier Group vs. United Airlines Holdings | Frontier Group vs. American Airlines Group |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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