Correlation Between Avis Budget and Ashtead Group
Can any of the company-specific risk be diversified away by investing in both Avis Budget and Ashtead Group 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 Ashtead Group 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 Ashtead Group plc, you can compare the effects of market volatilities on Avis Budget and Ashtead Group 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 Ashtead Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and Ashtead Group.
Diversification Opportunities for Avis Budget and Ashtead Group
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Avis and Ashtead is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and Ashtead Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtead Group plc 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 Ashtead Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashtead Group plc has no effect on the direction of Avis Budget i.e., Avis Budget and Ashtead Group go up and down completely randomly.
Pair Corralation between Avis Budget and Ashtead Group
Considering the 90-day investment horizon Avis Budget Group is expected to generate 1.92 times more return on investment than Ashtead Group. However, Avis Budget is 1.92 times more volatile than Ashtead Group plc. It trades about 0.27 of its potential returns per unit of risk. Ashtead Group plc is currently generating about 0.12 per unit of risk. If you would invest 8,710 in Avis Budget Group on August 30, 2024 and sell it today you would earn a total of 2,174 from holding Avis Budget Group or generate 24.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avis Budget Group vs. Ashtead Group plc
Performance |
| Timeline |
| Avis Budget Group |
| Ashtead Group plc |
Avis Budget and Ashtead Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avis Budget and Ashtead Group
The main advantage of trading using opposite Avis Budget and Ashtead Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget position performs unexpectedly, Ashtead Group 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 Ashtead Group will offset losses from the drop in Ashtead Group'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 |
| Ashtead Group vs. African Discovery Group | Ashtead Group vs. Emeco Holdings Limited | Ashtead Group vs. Solution Financial | Ashtead Group vs. BOC Aviation Limited |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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