Correlation Between Frontier Group and Herc Holdings
Can any of the company-specific risk be diversified away by investing in both Frontier Group 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 Frontier Group and Herc Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Frontier Group Holdings and Herc Holdings, you can compare the effects of market volatilities on Frontier Group 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 Frontier Group with a short position of Herc Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Frontier Group and Herc Holdings.
Diversification Opportunities for Frontier Group and Herc Holdings
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Frontier and Herc is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Frontier Group Holdings and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and Frontier Group 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 Frontier Group Holdings 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 Frontier Group i.e., Frontier Group and Herc Holdings go up and down completely randomly.
Pair Corralation between Frontier Group and Herc Holdings
Given the investment horizon of 90 days Frontier Group Holdings is expected to under-perform the Herc Holdings. In addition to that, Frontier Group is 1.8 times more volatile than Herc Holdings. It trades about -0.05 of its total potential returns per unit of risk. Herc Holdings is currently generating about 0.15 per unit of volatility. 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 |
Frontier Group Holdings vs. Herc Holdings
Performance |
| Timeline |
| Frontier Group Holdings |
| Herc Holdings |
Frontier Group and Herc Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Frontier Group and Herc Holdings
The main advantage of trading using opposite Frontier Group and Herc Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontier Group 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.| Frontier Group vs. JetBlue Airways Corp | Frontier Group vs. Southwest Airlines | Frontier Group vs. United Airlines Holdings | Frontier Group vs. American Airlines Group |
| 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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