Correlation Between Barrick Gold and Herc Holdings

Can any of the company-specific risk be diversified away by investing in both Barrick Gold and Herc Holdings 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 Barrick Gold and Herc Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Barrick Gold Corp and Herc Holdings, you can compare the effects of market volatilities on Barrick Gold and Herc Holdings 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 Barrick Gold with a short position of Herc Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barrick Gold and Herc Holdings.

Diversification Opportunities for Barrick Gold and Herc Holdings

-0.61

Correlation Coefficient

Barrick Gold  Herc Holdings

Excellent diversification

The 3 months correlation between Barrick and Herc is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Barrick Gold Corp and Herc Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herc Holdings and Barrick Gold 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 Barrick Gold Corp are associated (or correlated) with Herc Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herc Holdings has no effect on the direction of Barrick Gold i.e., Barrick Gold and Herc Holdings go up and down completely randomly.

Pair Corralation between Barrick Gold and Herc Holdings

Given the investment horizon of 90 days Barrick Gold Corp is expected to under-perform the Herc Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Barrick Gold Corp is 1.2 times less risky than Herc Holdings. The stock trades about -0.37 of its potential returns per unit of risk. The Herc Holdings is currently generating about -0.29 of returns per unit of risk over similar time horizon. If you would invest  21,706  in Herc Holdings on September 22, 2024 and sell it today you would lose (2,973) from holding Herc Holdings or give up 13.7% of portfolio value over 90 days.

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

Barrick Gold Corp  vs.  Herc Holdings

Barrick Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barrick Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Herc Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barrick Gold and Herc Holdings

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

The idea behind Barrick Gold Corp and Herc 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.