Correlation Between Baldwin Insurance and Herc Holdings

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

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

Diversification Opportunities for Baldwin Insurance and Herc Holdings

-0.19

Correlation Coefficient

Baldwin Insurance  Herc Holdings

Good diversification

The 3 months correlation between Baldwin and Herc is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding The Baldwin Insurance and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and Baldwin Insurance 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 Baldwin Insurance 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 Baldwin Insurance i.e., Baldwin Insurance and Herc Holdings go up and down completely randomly.

Pair Corralation between Baldwin Insurance and Herc Holdings

Given the investment horizon of 90 days The Baldwin Insurance is expected to under-perform the Herc Holdings. In addition to that, Baldwin Insurance is 1.0 times more volatile than Herc Holdings. It trades about -0.48 of its total potential returns per unit of risk. Herc Holdings is currently generating about -0.43 per unit of volatility. If you would invest  22,940  in Herc Holdings on October 7, 2024 and sell it today you would lose (4,098) from holding Herc Holdings or give up 17.86% of portfolio value over 90 days.

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

The Baldwin Insurance  vs.  Herc Holdings

Baldwin Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Baldwin Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Herc Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 7 (%) 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 Baldwin Insurance and Herc Holdings

The main advantage of trading using opposite Baldwin Insurance and Herc Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baldwin Insurance 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 The Baldwin Insurance 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .