Correlation Between Hertz Global and Ashtead Gro

Can any of the company-specific risk be diversified away by investing in both Hertz Global and Ashtead Gro 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 Ashtead Gro 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 Ashtead Gro, you can compare the effects of market volatilities on Hertz Global and Ashtead Gro 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 Ashtead Gro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hertz Global and Ashtead Gro.

Diversification Opportunities for Hertz Global and Ashtead Gro

0.35

Correlation Coefficient

Hertz Global  Ashtead Gro

Weak diversification

The 3 months correlation between Hertz and Ashtead is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and Ashtead Gro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtead Gro 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 Ashtead Gro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashtead Gro has no effect on the direction of Hertz Global i.e., Hertz Global and Ashtead Gro go up and down completely randomly.

Pair Corralation between Hertz Global and Ashtead Gro

Considering the 90-day investment horizon Hertz Global Holdings is expected to generate 1.88 times more return on investment than Ashtead Gro. However, Hertz Global is 1.88 times more volatile than Ashtead Gro. It trades about 0.1 of its potential returns per unit of risk. Ashtead Gro is currently generating about -0.03 per unit of risk. If you would invest  337.00  in Hertz Global Holdings on September 14, 2024 and sell it today you would earn a total of  91.00  from holding Hertz Global Holdings or generate 27.0% return on investment over 90 days.

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

Hertz Global Holdings  vs.  Ashtead Gro

Hertz Global Holdings

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hertz Global showed solid returns over the last few months and may actually be approaching a breakup point.

Ashtead Gro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ashtead Gro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Ashtead Gro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hertz Global and Ashtead Gro

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

The idea behind Hertz Global Holdings and Ashtead Gro 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.