Correlation Between JC Penney and Herc Holdings

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

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

Diversification Opportunities for JC Penney and Herc Holdings

0.0

Correlation Coefficient

JC Penney  Herc Holdings

Pay attention - limited upside

The 3 months correlation between JCP and Herc is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding J C Penney and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and JC Penney 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 J C Penney 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 JC Penney i.e., JC Penney and Herc Holdings go up and down completely randomly.

Pair Corralation between JC Penney and Herc Holdings

If you would invest (100.00) in J C Penney on February 7, 2024 and sell it today you would earn a total of  100.00  from holding J C Penney or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

J C Penney  vs.  Herc Holdings

J C Penney

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days J C Penney has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, JC Penney is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Herc Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Herc Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Herc Holdings is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with JC Penney and Herc Holdings

The main advantage of trading using opposite JC Penney and Herc Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JC Penney 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 J C Penney 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.