Correlation Between Hertz Global and African Discovery
Can any of the company-specific risk be diversified away by investing in both Hertz Global and African Discovery 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 Hertz Global and African Discovery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hertz Global Holdings and African Discovery Group, you can compare the effects of market volatilities on Hertz Global and African Discovery 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 Hertz Global with a short position of African Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hertz Global and African Discovery.
Diversification Opportunities for Hertz Global and African Discovery
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hertz and African is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and African Discovery Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Discovery and Hertz Global 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 Hertz Global Holdings are associated (or correlated) with African Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Discovery has no effect on the direction of Hertz Global i.e., Hertz Global and African Discovery go up and down completely randomly.
Pair Corralation between Hertz Global and African Discovery
Considering the 90-day investment horizon Hertz Global Holdings is expected to under-perform the African Discovery. But the stock apears to be less risky and, when comparing its historical volatility, Hertz Global Holdings is 4.33 times less risky than African Discovery. The stock trades about -0.05 of its potential returns per unit of risk. The African Discovery Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. 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 |
Hertz Global Holdings vs. African Discovery Group
Performance |
| Timeline |
| Hertz Global Holdings |
| African Discovery |
Hertz Global and African Discovery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hertz Global and African Discovery
The main advantage of trading using opposite Hertz Global and African Discovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hertz Global position performs unexpectedly, African Discovery 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 African Discovery will offset losses from the drop in African Discovery's long position.| Hertz Global vs. United Rentals | Hertz Global vs. Ryder System | Hertz Global vs. Herc Holdings | Hertz Global vs. Hertz Global Hldgs |
| African Discovery vs. Black Diamond Group | African Discovery vs. Alta Equipment Group | African Discovery vs. Ashtead Group plc | African Discovery vs. BOC Aviation Limited |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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