Correlation Between HE Equipment and Hertz Global

Can any of the company-specific risk be diversified away by investing in both HE Equipment and Hertz Global 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 HE Equipment and Hertz Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HE Equipment Services and Hertz Global Holdings, you can compare the effects of market volatilities on HE Equipment and Hertz Global 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 HE Equipment with a short position of Hertz Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and Hertz Global.

Diversification Opportunities for HE Equipment and Hertz Global

-0.31

Correlation Coefficient

HE Equipment  Hertz Global

Very good diversification

The 3 months correlation between HEES and Hertz is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Hertz Global Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hertz Global Holdings and HE Equipment 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 HE Equipment Services are associated (or correlated) with Hertz Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hertz Global Holdings has no effect on the direction of HE Equipment i.e., HE Equipment and Hertz Global go up and down completely randomly.

Pair Corralation between HE Equipment and Hertz Global

Given the investment horizon of 90 days HE Equipment Services is expected to generate 0.75 times more return on investment than Hertz Global. However, HE Equipment Services is 1.34 times less risky than Hertz Global. It trades about -0.26 of its potential returns per unit of risk. Hertz Global Holdings is currently generating about -0.38 per unit of risk. If you would invest  6,297  in HE Equipment Services on February 1, 2024 and sell it today you would lose (1,468) from holding HE Equipment Services or give up 23.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HE Equipment Services  vs.  Hertz Global Holdings

HE Equipment Services

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days HE Equipment Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Hertz Global Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hertz Global Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with HE Equipment and Hertz Global

The main advantage of trading using opposite HE Equipment and Hertz Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment position performs unexpectedly, Hertz Global 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 Hertz Global will offset losses from the drop in Hertz Global's long position.

The idea behind HE Equipment Services and Hertz Global Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.