Correlation Between Hertz Global and McGrath RentCorp
Can any of the company-specific risk be diversified away by investing in both Hertz Global and McGrath RentCorp 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 Hertz Global and McGrath RentCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hertz Global Holdings and McGrath RentCorp, you can compare the effects of market volatilities on Hertz Global and McGrath RentCorp 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 Hertz Global with a short position of McGrath RentCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hertz Global and McGrath RentCorp.
Diversification Opportunities for Hertz Global and McGrath RentCorp
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hertz and McGrath is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and McGrath RentCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McGrath RentCorp and Hertz Global 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 Hertz Global Holdings are associated (or correlated) with McGrath RentCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McGrath RentCorp has no effect on the direction of Hertz Global i.e., Hertz Global and McGrath RentCorp go up and down completely randomly.
Pair Corralation between Hertz Global and McGrath RentCorp
Considering the 90-day investment horizon Hertz Global Holdings is expected to generate 3.64 times more return on investment than McGrath RentCorp. However, Hertz Global is 3.64 times more volatile than McGrath RentCorp. It trades about 0.28 of its potential returns per unit of risk. McGrath RentCorp is currently generating about 0.27 per unit of risk. If you would invest 327.00 in Hertz Global Holdings on October 20, 2024 and sell it today you would earn a total of 76.00 from holding Hertz Global Holdings or generate 23.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hertz Global Holdings vs. McGrath RentCorp
Performance |
| Timeline |
| Hertz Global Holdings |
| McGrath RentCorp |
Hertz Global and McGrath RentCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hertz Global and McGrath RentCorp
The main advantage of trading using opposite Hertz Global and McGrath RentCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hertz Global position performs unexpectedly, McGrath RentCorp 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 McGrath RentCorp will offset losses from the drop in McGrath RentCorp's long position.| Hertz Global vs. United Rentals | Hertz Global vs. Ryder System | Hertz Global vs. Herc Holdings | Hertz Global vs. Hertz Global Hldgs |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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