Correlation Between Federal Agricultural and Avis Budget
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural 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 Federal Agricultural and Avis Budget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Agricultural Mortgage and Avis Budget Group, you can compare the effects of market volatilities on Federal Agricultural 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 Federal Agricultural with a short position of Avis Budget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and Avis Budget.
Diversification Opportunities for Federal Agricultural and Avis Budget
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Federal and Avis is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage 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 Federal Agricultural 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 Federal Agricultural Mortgage 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 Federal Agricultural i.e., Federal Agricultural and Avis Budget go up and down completely randomly.
Pair Corralation between Federal Agricultural and Avis Budget
Assuming the 90 days horizon Federal Agricultural is expected to generate 1.71 times less return on investment than Avis Budget. But when comparing it to its historical volatility, Federal Agricultural Mortgage is 2.24 times less risky than Avis Budget. It trades about 0.17 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 Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Agricultural Mortgage vs. Avis Budget Group
Performance |
| Timeline |
| Federal Agricultural |
| Avis Budget Group |
Federal Agricultural and Avis Budget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Agricultural and Avis Budget
The main advantage of trading using opposite Federal Agricultural and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural 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.| Federal Agricultural vs. Fair Isaac Corp | Federal Agricultural vs. Enter Air SA | Federal Agricultural vs. Ryanair Holdings plc | Federal Agricultural vs. Wizz Air Holdings |
| Avis Budget vs. United Rentals | Avis Budget vs. WillScot Mobile Mini | Avis Budget vs. Superior Plus Corp | Avis Budget vs. SIVERS SEMICONDUCTORS AB |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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