Correlation Between INTER CARS and Avis Budget

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Can any of the company-specific risk be diversified away by investing in both INTER CARS 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 INTER CARS and Avis Budget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INTER CARS SA and Avis Budget Group, you can compare the effects of market volatilities on INTER CARS 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 INTER CARS with a short position of Avis Budget. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTER CARS and Avis Budget.

Diversification Opportunities for INTER CARS and Avis Budget

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between INTER and Avis is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding INTER CARS SA 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 INTER CARS 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 INTER CARS SA 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 INTER CARS i.e., INTER CARS and Avis Budget go up and down completely randomly.

Pair Corralation between INTER CARS and Avis Budget

Assuming the 90 days horizon INTER CARS is expected to generate 1.78 times less return on investment than Avis Budget. But when comparing it to its historical volatility, INTER CARS SA is 1.76 times less risky than Avis Budget. It trades about 0.13 of its potential returns per unit of risk. Avis Budget Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8,634  in Avis Budget Group on September 12, 2024 and sell it today you would earn a total of  710.00  from holding Avis Budget Group or generate 8.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

INTER CARS SA  vs.  Avis Budget Group

 Performance 
       Timeline  
INTER CARS SA 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in INTER CARS SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, INTER CARS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Avis Budget Group 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Avis Budget Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Avis Budget reported solid returns over the last few months and may actually be approaching a breakup point.

INTER CARS and Avis Budget Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with INTER CARS and Avis Budget

The main advantage of trading using opposite INTER CARS and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTER CARS 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.
The idea behind INTER CARS SA and Avis Budget Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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