Correlation Between Avis Budget and Valero Energy
Can any of the company-specific risk be diversified away by investing in both Avis Budget and Valero Energy 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 Valero Energy 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 Valero Energy, you can compare the effects of market volatilities on Avis Budget and Valero Energy 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 Valero Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and Valero Energy.
Diversification Opportunities for Avis Budget and Valero Energy
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Avis and Valero is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy 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 Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of Avis Budget i.e., Avis Budget and Valero Energy go up and down completely randomly.
Pair Corralation between Avis Budget and Valero Energy
Assuming the 90 days trading horizon Avis Budget Group is expected to under-perform the Valero Energy. In addition to that, Avis Budget is 1.48 times more volatile than Valero Energy. It trades about -0.03 of its total potential returns per unit of risk. Valero Energy is currently generating about 0.07 per unit of volatility. If you would invest 203,734 in Valero Energy on September 14, 2024 and sell it today you would earn a total of 69,935 from holding Valero Energy or generate 34.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avis Budget Group vs. Valero Energy
Performance |
| Timeline |
| Avis Budget Group |
| Valero Energy |
Avis Budget and Valero Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avis Budget and Valero Energy
The main advantage of trading using opposite Avis Budget and Valero Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget position performs unexpectedly, Valero Energy 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 Valero Energy will offset losses from the drop in Valero Energy'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 |
| Valero Energy vs. The Walt Disney | Valero Energy vs. The Goodyear Tire | Valero Energy vs. Cognizant Technology Solutions | Valero Energy vs. Netflix |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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