Correlation Between Consolidated Edison and Hertz Global

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

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

Diversification Opportunities for Consolidated Edison and Hertz Global

-0.83

Correlation Coefficient

Consolidated Edison  Hertz Global

Pay attention - limited upside

The 3 months correlation between Consolidated and Hertz is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison 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 Consolidated Edison 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 Consolidated Edison 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 Consolidated Edison i.e., Consolidated Edison and Hertz Global go up and down completely randomly.

Pair Corralation between Consolidated Edison and Hertz Global

Allowing for the 90-day total investment horizon Consolidated Edison is expected to generate 0.16 times more return on investment than Hertz Global. However, Consolidated Edison is 6.26 times less risky than Hertz Global. It trades about 0.45 of its potential returns per unit of risk. Hertz Global Holdings is currently generating about -0.25 per unit of risk. If you would invest  8,889  in Consolidated Edison on February 10, 2024 and sell it today you would earn a total of  923.00  from holding Consolidated Edison or generate 10.38% return on investment over 90 days.

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

Consolidated Edison  vs.  Hertz Global Holdings

Consolidated Edison

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Edison are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Consolidated Edison may actually be approaching a critical reversion point that can send shares even higher in June 2024.

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 Consolidated Edison and Hertz Global

The main advantage of trading using opposite Consolidated Edison and Hertz Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison 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 Consolidated Edison 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.