Correlation Between Alta Equipment and Avis Budget
Can any of the company-specific risk be diversified away by investing in both Alta Equipment 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 Alta Equipment and Avis Budget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alta Equipment Group and Avis Budget Group, you can compare the effects of market volatilities on Alta Equipment 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 Alta Equipment with a short position of Avis Budget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alta Equipment and Avis Budget.
Diversification Opportunities for Alta Equipment and Avis Budget
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alta and Avis is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group 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 Alta Equipment 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 Alta Equipment Group 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 Alta Equipment i.e., Alta Equipment and Avis Budget go up and down completely randomly.
Pair Corralation between Alta Equipment and Avis Budget
Given the investment horizon of 90 days Alta Equipment is expected to generate 1.24 times less return on investment than Avis Budget. In addition to that, Alta Equipment is 1.25 times more volatile than Avis Budget Group. It trades about 0.18 of its total potential returns per unit of risk. Avis Budget Group is currently generating about 0.28 per unit of volatility. If you would invest 8,594 in Avis Budget Group on August 31, 2024 and sell it today you would earn a total of 2,290 from holding Avis Budget Group or generate 26.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alta Equipment Group vs. Avis Budget Group
Performance |
| Timeline |
| Alta Equipment Group |
| Avis Budget Group |
Alta Equipment and Avis Budget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alta Equipment and Avis Budget
The main advantage of trading using opposite Alta Equipment and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alta Equipment 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.| Alta Equipment vs. PROG Holdings | Alta Equipment vs. GATX Corporation | Alta Equipment vs. McGrath RentCorp | Alta Equipment vs. Custom Truck One |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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