Correlation Between BorgWarner and Avis Budget
Can any of the company-specific risk be diversified away by investing in both BorgWarner 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 BorgWarner and Avis Budget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BorgWarner and Avis Budget Group, you can compare the effects of market volatilities on BorgWarner 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 BorgWarner with a short position of Avis Budget. Check out your portfolio center. Please also check ongoing floating volatility patterns of BorgWarner and Avis Budget.
Diversification Opportunities for BorgWarner and Avis Budget
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BorgWarner and Avis is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner 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 BorgWarner 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 BorgWarner 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 BorgWarner i.e., BorgWarner and Avis Budget go up and down completely randomly.
Pair Corralation between BorgWarner and Avis Budget
Considering the 90-day investment horizon BorgWarner is expected to under-perform the Avis Budget. But the stock apears to be less risky and, when comparing its historical volatility, BorgWarner is 2.23 times less risky than Avis Budget. The stock trades about -0.28 of its potential returns per unit of risk. The Avis Budget Group is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 8,927 in Avis Budget Group on November 28, 2024 and sell it today you would lose (582.00) from holding Avis Budget Group or give up 6.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BorgWarner vs. Avis Budget Group
Performance |
| Timeline |
| BorgWarner |
| Avis Budget Group |
BorgWarner and Avis Budget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BorgWarner and Avis Budget
The main advantage of trading using opposite BorgWarner and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner 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.| BorgWarner vs. Lear Corporation | BorgWarner vs. Autoliv | BorgWarner vs. Fox Factory Holding | BorgWarner vs. LKQ Corporation |
| Avis Budget vs. Hertz Global Hldgs | Avis Budget vs. Ryder System | Avis Budget vs. HE Equipment Services | Avis Budget vs. United Rentals |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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