Correlation Between Hertz Global and Consorcio ARA

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

Diversification Opportunities for Hertz Global and Consorcio ARA

-0.37

Correlation Coefficient

Hertz Global  Consorcio ARA

Very good diversification

The 3 months correlation between Hertz and Consorcio is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and Consorcio ARA S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consorcio ARA S 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 Consorcio ARA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consorcio ARA S has no effect on the direction of Hertz Global i.e., Hertz Global and Consorcio ARA go up and down completely randomly.

Pair Corralation between Hertz Global and Consorcio ARA

Considering the 90-day investment horizon Hertz Global Holdings is expected to generate 0.46 times more return on investment than Consorcio ARA. However, Hertz Global Holdings is 2.18 times less risky than Consorcio ARA. It trades about 0.18 of its potential returns per unit of risk. Consorcio ARA S is currently generating about -0.01 per unit of risk. If you would invest  299.00  in Hertz Global Holdings on September 3, 2024 and sell it today you would earn a total of  193.00  from holding Hertz Global Holdings or generate 64.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Hertz Global Holdings  vs.  Consorcio ARA S

Hertz Global Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Holdings are ranked lower than 14 (%) 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.

Consorcio ARA S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consorcio ARA S has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Consorcio ARA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hertz Global and Consorcio ARA

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

The idea behind Hertz Global Holdings and Consorcio ARA S 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.