Correlation Between Hertz Global and Aarons

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

Diversification Opportunities for Hertz Global and Aarons

0.27

Correlation Coefficient

Hertz Global  Aarons

Modest diversification

The 3 months correlation between Hertz and Aarons is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Holdings and The Aarons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarons 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 Aarons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarons has no effect on the direction of Hertz Global i.e., Hertz Global and Aarons go up and down completely randomly.

Pair Corralation between Hertz Global and Aarons

Considering the 90-day investment horizon Hertz Global Holdings is expected to generate 1.49 times more return on investment than Aarons. However, Hertz Global is 1.49 times more volatile than The Aarons. It trades about -0.06 of its potential returns per unit of risk. The Aarons is currently generating about -0.13 per unit of risk. If you would invest  729.00  in Hertz Global Holdings on February 20, 2024 and sell it today you would lose (176.00) from holding Hertz Global Holdings or give up 24.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Hertz Global Holdings  vs.  The Aarons

Hertz Global Holdings

Risk-Adjusted Performance

0 of 100

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 inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Aarons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Aarons has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Hertz Global and Aarons

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

The idea behind Hertz Global Holdings and The Aarons 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.