Correlation Between Hertz Global and Loandepot

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

Diversification Opportunities for Hertz Global and Loandepot

-0.03

Correlation Coefficient

Hertz Global  Loandepot

Good diversification

The 3 months correlation between Hertz and Loandepot is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and Loandepot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loandepot 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 Loandepot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loandepot has no effect on the direction of Hertz Global i.e., Hertz Global and Loandepot go up and down completely randomly.

Pair Corralation between Hertz Global and Loandepot

Considering the 90-day investment horizon Hertz Global Holdings is expected to generate 2.47 times more return on investment than Loandepot. However, Hertz Global is 2.47 times more volatile than Loandepot. It trades about -0.09 of its potential returns per unit of risk. Loandepot is currently generating about -0.23 per unit of risk. If you would invest  416.00  in Hertz Global Holdings on September 19, 2024 and sell it today you would lose (50.00) from holding Hertz Global Holdings or give up 12.02% of portfolio value over 90 days.

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

Hertz Global Holdings  vs.  Loandepot

Hertz Global Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Holdings are ranked lower than 3 (%) 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.

Loandepot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loandepot has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Hertz Global and Loandepot

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

The idea behind Hertz Global Holdings and Loandepot 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.