Correlation Between Avis Budget and Cadence Design
Can any of the company-specific risk be diversified away by investing in both Avis Budget and Cadence Design 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 Cadence Design 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 Cadence Design Systems, you can compare the effects of market volatilities on Avis Budget and Cadence Design 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 Cadence Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and Cadence Design.
Diversification Opportunities for Avis Budget and Cadence Design
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Avis and Cadence is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and Cadence Design Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Design Systems 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 Cadence Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Design Systems has no effect on the direction of Avis Budget i.e., Avis Budget and Cadence Design go up and down completely randomly.
Pair Corralation between Avis Budget and Cadence Design
Considering the 90-day investment horizon Avis Budget Group is expected to under-perform the Cadence Design. In addition to that, Avis Budget is 1.71 times more volatile than Cadence Design Systems. It trades about -0.01 of its total potential returns per unit of risk. Cadence Design Systems is currently generating about 0.07 per unit of volatility. If you would invest 16,823 in Cadence Design Systems on September 3, 2024 and sell it today you would earn a total of 13,858 from holding Cadence Design Systems or generate 82.38% 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. Cadence Design Systems
Performance |
| Timeline |
| Avis Budget Group |
| Cadence Design Systems |
Avis Budget and Cadence Design Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avis Budget and Cadence Design
The main advantage of trading using opposite Avis Budget and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget position performs unexpectedly, Cadence Design 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 Cadence Design will offset losses from the drop in Cadence Design'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 |
| Cadence Design vs. Workday | Cadence Design vs. Salesforce | Cadence Design vs. Intuit Inc | Cadence Design vs. Snowflake |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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