Correlation Between Avis Budget and BorgWarner
Can any of the company-specific risk be diversified away by investing in both Avis Budget and BorgWarner 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 BorgWarner 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 BorgWarner, you can compare the effects of market volatilities on Avis Budget and BorgWarner 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 BorgWarner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and BorgWarner.
Diversification Opportunities for Avis Budget and BorgWarner
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Avis and BorgWarner is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner 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 BorgWarner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BorgWarner has no effect on the direction of Avis Budget i.e., Avis Budget and BorgWarner go up and down completely randomly.
Pair Corralation between Avis Budget and BorgWarner
Considering the 90-day investment horizon Avis Budget Group is expected to generate 1.91 times more return on investment than BorgWarner. However, Avis Budget is 1.91 times more volatile than BorgWarner. It trades about 0.26 of its potential returns per unit of risk. BorgWarner is currently generating about 0.08 per unit of risk. If you would invest 9,206 in Avis Budget Group on September 2, 2024 and sell it today you would earn a total of 1,701 from holding Avis Budget Group or generate 18.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avis Budget Group vs. BorgWarner
Performance |
| Timeline |
| Avis Budget Group |
| BorgWarner |
Avis Budget and BorgWarner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avis Budget and BorgWarner
The main advantage of trading using opposite Avis Budget and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget position performs unexpectedly, BorgWarner 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 BorgWarner will offset losses from the drop in BorgWarner'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 |
| BorgWarner vs. Lear Corporation | BorgWarner vs. Autoliv | BorgWarner vs. Fox Factory Holding | BorgWarner vs. LKQ Corporation |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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