Correlation Between Biglari Holdings and Herc Holdings

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

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

Diversification Opportunities for Biglari Holdings and Herc Holdings

0.65

Correlation Coefficient

Biglari Holdings  Herc Holdings

Poor diversification

The 3 months correlation between Biglari and Herc is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Biglari Holdings and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and Biglari Holdings 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 Biglari Holdings 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 Biglari Holdings i.e., Biglari Holdings and Herc Holdings go up and down completely randomly.

Pair Corralation between Biglari Holdings and Herc Holdings

Allowing for the 90-day total investment horizon Biglari Holdings is expected to generate 1.26 times less return on investment than Herc Holdings. But when comparing it to its historical volatility, Biglari Holdings is 1.47 times less risky than Herc Holdings. It trades about 0.23 of its potential returns per unit of risk. Herc Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  14,318  in Herc Holdings on September 15, 2024 and sell it today you would earn a total of  6,463  from holding Herc Holdings or generate 45.14% return on investment over 90 days.

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

Biglari Holdings  vs.  Herc Holdings

Biglari Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Herc Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biglari Holdings and Herc Holdings

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

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.