Correlation Between Herc Holdings and WPP PLC
Can any of the company-specific risk be diversified away by investing in both Herc Holdings and WPP PLC 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 WPP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Herc Holdings and WPP PLC ADR, you can compare the effects of market volatilities on Herc Holdings and WPP PLC 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 WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herc Holdings and WPP PLC.
Diversification Opportunities for Herc Holdings and WPP PLC
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Herc and WPP is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and WPP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC ADR 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 WPP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPP PLC ADR has no effect on the direction of Herc Holdings i.e., Herc Holdings and WPP PLC go up and down completely randomly.
Pair Corralation between Herc Holdings and WPP PLC
Considering the 90-day investment horizon Herc Holdings is expected to generate 1.82 times more return on investment than WPP PLC. However, Herc Holdings is 1.82 times more volatile than WPP PLC ADR. It trades about 0.05 of its potential returns per unit of risk. WPP PLC ADR is currently generating about 0.02 per unit of risk. If you would invest 14,454 in Herc Holdings on September 3, 2024 and sell it today you would earn a total of 8,559 from holding Herc Holdings or generate 59.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Herc Holdings vs. WPP PLC ADR
Performance |
| Timeline |
| Herc Holdings |
| WPP PLC ADR |
Herc Holdings and WPP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Herc Holdings and WPP PLC
The main advantage of trading using opposite Herc Holdings and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herc Holdings position performs unexpectedly, WPP PLC 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 WPP PLC will offset losses from the drop in WPP PLC'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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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