Correlation Between Avis Budget and Bayerische Motoren
Can any of the company-specific risk be diversified away by investing in both Avis Budget and Bayerische Motoren 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 Avis Budget and Bayerische Motoren into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avis Budget Group and Bayerische Motoren Werke, you can compare the effects of market volatilities on Avis Budget and Bayerische Motoren 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 Avis Budget with a short position of Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and Bayerische Motoren.
Diversification Opportunities for Avis Budget and Bayerische Motoren
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Avis and Bayerische is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke and Avis Budget 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 Avis Budget Group are associated (or correlated) with Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of Avis Budget i.e., Avis Budget and Bayerische Motoren go up and down completely randomly.
Pair Corralation between Avis Budget and Bayerische Motoren
Assuming the 90 days trading horizon Avis Budget Group is expected to under-perform the Bayerische Motoren. In addition to that, Avis Budget is 2.15 times more volatile than Bayerische Motoren Werke. It trades about -0.03 of its total potential returns per unit of risk. Bayerische Motoren Werke is currently generating about -0.01 per unit of volatility. If you would invest 171,045 in Bayerische Motoren Werke on September 14, 2024 and sell it today you would lose (9,623) from holding Bayerische Motoren Werke or give up 5.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avis Budget Group vs. Bayerische Motoren Werke
Performance |
| Timeline |
| Avis Budget Group |
| Bayerische Motoren Werke |
Avis Budget and Bayerische Motoren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avis Budget and Bayerische Motoren
The main advantage of trading using opposite Avis Budget and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget position performs unexpectedly, Bayerische Motoren 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 Bayerische Motoren will offset losses from the drop in Bayerische Motoren's long position.| Avis Budget vs. Applied Materials | Avis Budget vs. Grupo Carso SAB | Avis Budget vs. Southwest Airlines | Avis Budget vs. United Airlines Holdings |
| Bayerische Motoren vs. Verizon Communications | Bayerische Motoren vs. United Airlines Holdings | Bayerische Motoren vs. First Republic Bank | Bayerische Motoren vs. McEwen Mining |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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