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 Holdings 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

0.6

Correlation Coefficient

Hertz Global  FlexShopper

Poor diversification

The 3 months correlation between Hertz and FlexShopper is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings 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 Holdings 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

Considering the 90-day investment horizon Hertz Global Holdings is expected to under-perform the FlexShopper. In addition to that, Hertz Global is 1.16 times more volatile than FlexShopper. It trades about -0.22 of its total potential returns per unit of risk. FlexShopper is currently generating about 0.03 per unit of volatility. If you would invest  115.00  in FlexShopper on March 14, 2024 and sell it today you would earn a total of  3.00  from holding FlexShopper or generate 2.61% return on investment over 90 days.

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

Hertz Global Holdings  vs.  FlexShopper

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 abnormal 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.

FlexShopper

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShopper are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, FlexShopper may actually be approaching a critical reversion point that can send shares even higher in July 2024.

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 Holdings 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.