Use Herbalife Ltd. performance concurrently with your other holdings to protect against small markets fluctuations and to back test it against optimization strategy that fits your risk preferences.
If you would invest 7,047 in Herbalife Ltd. on April 26, 2012 and sell it today you would lose (2,562) from holding Herbalife Ltd. or give up 36.36% of portfolio value over 30 days. Herbalife Ltd. is generating negative expected returns assuming volatility of 6.79% on return distribution over 30 days investment horizon. In other words, majority of equities are less volatile than the company and most equities are expected to generate higher returns over the next 30 days.
Daily Expected Return (%)
Risk [Daily Volatility] (%)
Considering 30-days investment horizon, Herbalife Ltd. is expected to under-perform the market. In addition to that, the company is 9.3 times more volatile than its market benchmark. It trades about -0.28 of its total potential returns per unit of risk. The NYSE is currently generating roughly -0.47 per unit of volatility.
Herbalife Operating Margin
Based on recorded statements Herbalife Ltd. has Operating Margin of 16.36%. This is 159.51% lower than that of Healthcare sector, and 246.59% lower than that of Drug Related Products industry, The Operating Margin for all stocks is 418.91% lower than the firm.
A good Operating Margin is required for a company to be able to pay for its fixed costs or pay out its debt which implies that the higher the margin, the better. This ratio is most effective in evaluating the earning potential of a company over time when comparing it against firm's competitors.
Over the last 30 days Herbalife Ltd. has generated negative risk-adjusted returns adding no value to investors with long positions.
1 Month Effecincy (a.k Sharpe Ratio) ...
-0.28
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HLF
Estimated Market Risk
6.79
actual daily
4 %
of total potential
Expected Return
-1.91
actual daily
1 %
of total potential
Risk-Adjusted Return
-0.28
actual daily
1 %
of total potential
Based on monthly moving average Herbalife is performing at about 0% of its full potential. If added to a well diversified portfolio the total return can be enhanced and market risk can be reduced. You can increase risk-adjusted return of Herbalife by adding it to a well-diversified portfolio.
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