Correlation Between Hertz Global and FlexShopper

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

By analyzing existing cross correlation between Hertz Global Hldgs and FlexShopper, you can compare the effects of market volatilities on Hertz Global and FlexShopper 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 FlexShopper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hertz Global and FlexShopper.

Diversification Opportunities for Hertz Global and FlexShopper

0.31

Correlation Coefficient

Hertz Global  FlexShopper

Weak diversification

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

Pair Corralation between Hertz Global and FlexShopper

Assuming the 90 days horizon Hertz Global is expected to generate 1.88 times less return on investment than FlexShopper. But when comparing it to its historical volatility, Hertz Global Hldgs is 1.09 times less risky than FlexShopper. It trades about 0.13 of its potential returns per unit of risk. FlexShopper is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  109.00  in FlexShopper on September 3, 2024 and sell it today you would earn a total of  89.00  from holding FlexShopper or generate 81.65% 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 Hldgs  vs.  FlexShopper

Hertz Global Hldgs

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Hldgs are ranked lower than 10 (%) 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.

FlexShopper

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShopper are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, FlexShopper showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hertz Global and FlexShopper

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

The idea behind Hertz Global Hldgs and FlexShopper 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.