Correlation Between ACADIA Pharmaceuticals and Hertz Global

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

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

Diversification Opportunities for ACADIA Pharmaceuticals and Hertz Global

0.65

Correlation Coefficient

ACADIA Pharmaceuticals  Hertz Global

Poor diversification

The 3 months correlation between ACADIA and Hertz is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding ACADIA Pharmaceuticals 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 ACADIA Pharmaceuticals 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 ACADIA Pharmaceuticals 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 ACADIA Pharmaceuticals i.e., ACADIA Pharmaceuticals and Hertz Global go up and down completely randomly.

Pair Corralation between ACADIA Pharmaceuticals and Hertz Global

Given the investment horizon of 90 days ACADIA Pharmaceuticals is expected to under-perform the Hertz Global. But the stock apears to be less risky and, when comparing its historical volatility, ACADIA Pharmaceuticals is 1.47 times less risky than Hertz Global. The stock trades about -0.25 of its potential returns per unit of risk. The Hertz Global Holdings is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  868.00  in Hertz Global Holdings on February 11, 2024 and sell it today you would lose (379.00) from holding Hertz Global Holdings or give up 43.66% of portfolio value over 90 days.

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

ACADIA Pharmaceuticals  vs.  Hertz Global Holdings

ACADIA Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ACADIA Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ACADIA Pharmaceuticals and Hertz Global

The main advantage of trading using opposite ACADIA Pharmaceuticals and Hertz Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACADIA Pharmaceuticals 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 ACADIA Pharmaceuticals 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.