Correlation Between Hertz Global and Morgan Stanley

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

Diversification Opportunities for Hertz Global and Morgan Stanley

0.58

Correlation Coefficient

Hertz Global  Morgan Stanley

Very weak diversification

The 3 months correlation between Hertz and Morgan is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of Hertz Global i.e., Hertz Global and Morgan Stanley go up and down completely randomly.

Pair Corralation between Hertz Global and Morgan Stanley

Considering the 90-day investment horizon Hertz Global Holdings is expected to under-perform the Morgan Stanley. In addition to that, Hertz Global is 5.5 times more volatile than Morgan Stanley. It trades about -0.09 of its total potential returns per unit of risk. Morgan Stanley is currently generating about -0.23 per unit of volatility. If you would invest  13,378  in Morgan Stanley on September 19, 2024 and sell it today you would lose (604.00) from holding Morgan Stanley or give up 4.51% of portfolio value over 90 days.

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

Hertz Global Holdings  vs.  Morgan Stanley

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.

Morgan Stanley

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hertz Global and Morgan Stanley

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

The idea behind Hertz Global Holdings and Morgan Stanley 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.