Correlation Between Avis Budget and Air Lease
Can any of the company-specific risk be diversified away by investing in both Avis Budget and Air Lease 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 Air Lease 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 Air Lease, you can compare the effects of market volatilities on Avis Budget and Air Lease 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 Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and Air Lease.
Diversification Opportunities for Avis Budget and Air Lease
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Avis and Air is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Avis Budget i.e., Avis Budget and Air Lease go up and down completely randomly.
Pair Corralation between Avis Budget and Air Lease
Considering the 90-day investment horizon Avis Budget Group is expected to generate 2.44 times more return on investment than Air Lease. However, Avis Budget is 2.44 times more volatile than Air Lease. It trades about 0.28 of its potential returns per unit of risk. Air Lease is currently generating about 0.31 per unit of risk. If you would invest 7,965 in Avis Budget Group on August 23, 2024 and sell it today you would earn a total of 2,199 from holding Avis Budget Group or generate 27.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avis Budget Group vs. Air Lease
Performance |
| Timeline |
| Avis Budget Group |
| Air Lease |
Avis Budget and Air Lease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avis Budget and Air Lease
The main advantage of trading using opposite Avis Budget and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget position performs unexpectedly, Air Lease 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 Air Lease will offset losses from the drop in Air Lease's long position.| Avis Budget vs. Hertz Global Hldgs | Avis Budget vs. Ryder System | Avis Budget vs. HE Equipment Services | Avis Budget vs. United Rentals |
| Air Lease vs. Alta Equipment Group | Air Lease vs. McGrath RentCorp | Air Lease vs. Herc Holdings | Air Lease vs. HE Equipment Services |
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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