Correlation Between Hertz Global and Continental Beverage

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

Diversification Opportunities for Hertz Global and Continental Beverage

-0.53

Correlation Coefficient

Hertz Global  Continental Beverage

Excellent diversification

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

Pair Corralation between Hertz Global and Continental Beverage

Considering the 90-day investment horizon Hertz Global Holdings is expected to under-perform the Continental Beverage. But the stock apears to be less risky and, when comparing its historical volatility, Hertz Global Holdings is 1.3 times less risky than Continental Beverage. The stock trades about -0.24 of its potential returns per unit of risk. The Continental Beverage Brands is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Continental Beverage Brands on March 7, 2024 and sell it today you would lose (6.00) from holding Continental Beverage Brands or give up 24.0% of portfolio value over 90 days.

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

Hertz Global Holdings  vs.  Continental Beverage Brands

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.

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.

Pair Trading with Hertz Global and Continental Beverage

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

The idea behind Hertz Global Holdings and Continental Beverage Brands 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.