Correlation Between African Discovery and Hertz Global
Can any of the company-specific risk be diversified away by investing in both African Discovery 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 African Discovery and Hertz Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between African Discovery Group and Hertz Global Holdings, you can compare the effects of market volatilities on African Discovery 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 African Discovery with a short position of Hertz Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Discovery and Hertz Global.
Diversification Opportunities for African Discovery and Hertz Global
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between African and Hertz is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding African Discovery Group 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 African Discovery 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 African Discovery Group 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 African Discovery i.e., African Discovery and Hertz Global go up and down completely randomly.
Pair Corralation between African Discovery and Hertz Global
Given the investment horizon of 90 days African Discovery Group is expected to generate 4.33 times more return on investment than Hertz Global. However, African Discovery is 4.33 times more volatile than Hertz Global Holdings. It trades about 0.05 of its potential returns per unit of risk. Hertz Global Holdings is currently generating about -0.05 per unit of risk. If you would invest 6.00 in African Discovery Group on October 21, 2024 and sell it today you would lose (4.60) from holding African Discovery Group or give up 76.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
African Discovery Group vs. Hertz Global Holdings
Performance |
| Timeline |
| African Discovery |
| Hertz Global Holdings |
African Discovery and Hertz Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with African Discovery and Hertz Global
The main advantage of trading using opposite African Discovery and Hertz Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Discovery 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.| African Discovery vs. Black Diamond Group | African Discovery vs. Alta Equipment Group | African Discovery vs. Ashtead Group plc | African Discovery vs. BOC Aviation Limited |
| Hertz Global vs. United Rentals | Hertz Global vs. Ryder System | Hertz Global vs. Herc Holdings | Hertz Global vs. Hertz Global Hldgs |
Check out your portfolio center.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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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