Correlation Between Hertz Global and Barloworld

Can any of the company-specific risk be diversified away by investing in both Hertz Global and Barloworld 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 Barloworld 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 Barloworld Ltd ADR, you can compare the effects of market volatilities on Hertz Global and Barloworld 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 Barloworld. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hertz Global and Barloworld.

Diversification Opportunities for Hertz Global and Barloworld

-0.29

Correlation Coefficient

Hertz Global  Barloworld

Very good diversification

The 3 months correlation between Hertz and Barloworld is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR 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 Barloworld. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barloworld ADR has no effect on the direction of Hertz Global i.e., Hertz Global and Barloworld go up and down completely randomly.

Pair Corralation between Hertz Global and Barloworld

Considering the 90-day investment horizon Hertz Global Holdings is expected to generate 0.83 times more return on investment than Barloworld. However, Hertz Global Holdings is 1.2 times less risky than Barloworld. It trades about -0.04 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about -0.05 per unit of risk. If you would invest  492.00  in Hertz Global Holdings on November 28, 2024 and sell it today you would lose (68.00) from holding Hertz Global Holdings or give up 13.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.69%
Values	Daily Returns

Hertz Global Holdings  vs.  Barloworld Ltd ADR

Hertz Global Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hertz Global Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Barloworld ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Barloworld Ltd ADR 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 basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hertz Global and Barloworld

The main advantage of trading using opposite Hertz Global and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hertz Global position performs unexpectedly, Barloworld 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 Barloworld will offset losses from the drop in Barloworld's long position.

The idea behind Hertz Global Holdings and Barloworld Ltd ADR 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.