Correlation Between Renesas Electronics and Herc Holdings
Can any of the company-specific risk be diversified away by investing in both Renesas Electronics and Herc Holdings 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 Renesas Electronics and Herc Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Renesas Electronics and Herc Holdings, you can compare the effects of market volatilities on Renesas Electronics and Herc Holdings 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 Renesas Electronics with a short position of Herc Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renesas Electronics and Herc Holdings.
Diversification Opportunities for Renesas Electronics and Herc Holdings
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Renesas and Herc is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and Renesas Electronics 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 Renesas Electronics are associated (or correlated) with Herc Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herc Holdings has no effect on the direction of Renesas Electronics i.e., Renesas Electronics and Herc Holdings go up and down completely randomly.
Pair Corralation between Renesas Electronics and Herc Holdings
Assuming the 90 days horizon Renesas Electronics is expected to under-perform the Herc Holdings. In addition to that, Renesas Electronics is 1.13 times more volatile than Herc Holdings. It trades about -0.06 of its total potential returns per unit of risk. Herc Holdings is currently generating about 0.17 per unit of volatility. If you would invest 19,800 in Herc Holdings on August 30, 2024 and sell it today you would earn a total of 2,000 from holding Herc Holdings or generate 10.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Renesas Electronics vs. Herc Holdings
Performance |
| Timeline |
| Renesas Electronics |
| Herc Holdings |
Renesas Electronics and Herc Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Renesas Electronics and Herc Holdings
The main advantage of trading using opposite Renesas Electronics and Herc Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renesas Electronics position performs unexpectedly, Herc Holdings 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 Herc Holdings will offset losses from the drop in Herc Holdings' long position.| Renesas Electronics vs. Texas Instruments Incorporated | Renesas Electronics vs. Advanced Micro Devices | Renesas Electronics vs. Advanced Micro Devices |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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