Correlation Between PETRONAS Gas and Hertz Global

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

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

Diversification Opportunities for PETRONAS Gas and Hertz Global

-0.09

Correlation Coefficient

PETRONAS Gas  Hertz Global

Good diversification

The 3 months correlation between PETRONAS and Hertz is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding PETRONAS Gas Berhad 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 PETRONAS Gas 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 PETRONAS Gas Berhad 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 PETRONAS Gas i.e., PETRONAS Gas and Hertz Global go up and down completely randomly.

Pair Corralation between PETRONAS Gas and Hertz Global

Assuming the 90 days horizon PETRONAS Gas Berhad is expected to under-perform the Hertz Global. But the pink sheet apears to be less risky and, when comparing its historical volatility, PETRONAS Gas Berhad is 13.33 times less risky than Hertz Global. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Hertz Global Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  343.00  in Hertz Global Holdings on October 6, 2024 and sell it today you would earn a total of  30.00  from holding Hertz Global Holdings or generate 8.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

PETRONAS Gas Berhad  vs.  Hertz Global Holdings

PETRONAS Gas Berhad

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hertz Global Holdings

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Holdings are ranked lower than 4 (%) 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 PETRONAS Gas and Hertz Global

The main advantage of trading using opposite PETRONAS Gas and Hertz Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PETRONAS Gas 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 PETRONAS Gas Berhad 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.