Correlation Between Continental Beverage and Hertz Global

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

By analyzing existing cross correlation between Continental Beverage Brands and Hertz Global Holdings, you can compare the effects of market volatilities on Continental Beverage and Hertz Global 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 Continental Beverage with a short position of Hertz Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental Beverage and Hertz Global.

Diversification Opportunities for Continental Beverage and Hertz Global

-0.53

Correlation Coefficient

Continental Beverage  Hertz Global

Excellent diversification

The 3 months correlation between Continental and Hertz is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Continental Beverage Brands and Hertz Global Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hertz Global Holdings and Continental Beverage 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 Continental Beverage Brands are associated (or correlated) with Hertz Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hertz Global Holdings has no effect on the direction of Continental Beverage i.e., Continental Beverage and Hertz Global go up and down completely randomly.

Pair Corralation between Continental Beverage and Hertz Global

Given the investment horizon of 90 days Continental Beverage Brands is expected to under-perform the Hertz Global. In addition to that, Continental Beverage is 1.33 times more volatile than Hertz Global Holdings. It trades about -0.17 of its total potential returns per unit of risk. Hertz Global Holdings is currently generating about -0.22 per unit of volatility. If you would invest  515.00  in Hertz Global Holdings on March 7, 2024 and sell it today you would lose (116.50) from holding Hertz Global Holdings or give up 22.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Continental Beverage Brands  vs.  Hertz Global Holdings

Continental Beverage

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Continental Beverage Brands are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental drivers, Continental Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Hertz Global Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hertz Global Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Continental Beverage and Hertz Global

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

The idea behind Continental Beverage Brands and Hertz Global Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.