Correlation Between Herc Holdings and Triton International

Can any of the company-specific risk be diversified away by investing in both Herc Holdings and Triton International 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 Triton International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Herc Holdings and Triton International Limited, you can compare the effects of market volatilities on Herc Holdings and Triton International 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 Triton International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herc Holdings and Triton International.

Diversification Opportunities for Herc Holdings and Triton International

0.61

Correlation Coefficient

Herc Holdings  Triton International

Poor diversification

The 3 months correlation between Herc and Triton is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and Triton International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triton International 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 Triton International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triton International has no effect on the direction of Herc Holdings i.e., Herc Holdings and Triton International go up and down completely randomly.

Pair Corralation between Herc Holdings and Triton International

Considering the 90-day investment horizon Herc Holdings is expected to generate 14.56 times more return on investment than Triton International. However, Herc Holdings is 14.56 times more volatile than Triton International Limited. It trades about 0.27 of its potential returns per unit of risk. Triton International Limited is currently generating about 0.13 per unit of risk. If you would invest  13,737  in Herc Holdings on September 4, 2024 and sell it today you would earn a total of  9,276  from holding Herc Holdings or generate 67.53% return on investment over 90 days.

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

Herc Holdings  vs.  Triton International Limited

Herc Holdings

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Triton International

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Triton International Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Triton International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Herc Holdings and Triton International

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

The idea behind Herc Holdings and Triton International Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.