Correlation Between Fortress Transp and Herc Holdings

Can any of the company-specific risk be diversified away by investing in both Fortress Transp and Herc Holdings 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 Fortress Transp and Herc Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Fortress Transp and Herc Holdings

0.64

Correlation Coefficient

Fortress Transp  Herc Holdings

Poor diversification

The 3 months correlation between Fortress and Herc is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Transp Infra and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and Fortress Transp 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 Fortress Transp Infra are associated (or correlated) with Herc Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herc Holdings has no effect on the direction of Fortress Transp i.e., Fortress Transp and Herc Holdings go up and down completely randomly.

Pair Corralation between Fortress Transp and Herc Holdings

Given the investment horizon of 90 days Fortress Transp Infra is expected to generate 0.84 times more return on investment than Herc Holdings. However, Fortress Transp Infra is 1.2 times less risky than Herc Holdings. It trades about 0.16 of its potential returns per unit of risk. Herc Holdings is currently generating about 0.06 per unit of risk. If you would invest  1,534  in Fortress Transp Infra on January 25, 2024 and sell it today you would earn a total of  5,811  from holding Fortress Transp Infra or generate 378.81% return on investment over 90 days.

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

Fortress Transp Infra  vs.  Herc Holdings

Fortress Transp Infra

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Transp Infra are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Fortress Transp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Herc Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Herc Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Fortress Transp and Herc Holdings

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

The idea behind Fortress Transp Infra and Herc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.