Correlation Between Aarons and Hertz Global

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

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

Diversification Opportunities for Aarons and Hertz Global

0.54

Correlation Coefficient

Aarons  Hertz Global

Very weak diversification

The 3 months correlation between Aarons and Hertz is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding The Aarons 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 Aarons 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 The Aarons 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 Aarons i.e., Aarons and Hertz Global go up and down completely randomly.

Pair Corralation between Aarons and Hertz Global

Considering the 90-day investment horizon Aarons is expected to generate 7.64 times less return on investment than Hertz Global. But when comparing it to its historical volatility, The Aarons is 12.55 times less risky than Hertz Global. It trades about 0.26 of its potential returns per unit of risk. Hertz Global Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  292.00  in Hertz Global Holdings on September 4, 2024 and sell it today you would earn a total of  159.00  from holding Hertz Global Holdings or generate 54.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	35.94%
Values	Daily Returns

The Aarons  vs.  Hertz Global Holdings

Aarons

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days The Aarons has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very uncertain basic indicators, Aarons may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hertz Global Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hertz Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aarons and Hertz Global

The main advantage of trading using opposite Aarons and Hertz Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aarons 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 The Aarons 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.