Correlation Between DXC Technology and Avis Budget
Can any of the company-specific risk be diversified away by investing in both DXC Technology and Avis Budget 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 DXC Technology and Avis Budget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DXC Technology Co and Avis Budget Group, you can compare the effects of market volatilities on DXC Technology and Avis Budget 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 DXC Technology with a short position of Avis Budget. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXC Technology and Avis Budget.
Diversification Opportunities for DXC Technology and Avis Budget
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DXC and Avis is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding DXC Technology Co and Avis Budget Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avis Budget Group and DXC Technology 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 DXC Technology Co are associated (or correlated) with Avis Budget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avis Budget Group has no effect on the direction of DXC Technology i.e., DXC Technology and Avis Budget go up and down completely randomly.
Pair Corralation between DXC Technology and Avis Budget
Assuming the 90 days trading horizon DXC Technology Co is expected to under-perform the Avis Budget. In addition to that, DXC Technology is 1.11 times more volatile than Avis Budget Group. It trades about -0.04 of its total potential returns per unit of risk. Avis Budget Group is currently generating about 0.32 per unit of volatility. If you would invest 8,080 in Avis Budget Group on October 23, 2024 and sell it today you would earn a total of 994.00 from holding Avis Budget Group or generate 12.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
DXC Technology Co vs. Avis Budget Group
Performance |
| Timeline |
| DXC Technology |
| Avis Budget Group |
DXC Technology and Avis Budget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DXC Technology and Avis Budget
The main advantage of trading using opposite DXC Technology and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXC Technology position performs unexpectedly, Avis Budget 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 Avis Budget will offset losses from the drop in Avis Budget's long position.| DXC Technology vs. Home Depot | DXC Technology vs. Weiss Korea Opportunity | DXC Technology vs. River and Mercantile | DXC Technology vs. Chrysalis Investments |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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