Correlation Between Avis Budget and CenterPoint Energy
Can any of the company-specific risk be diversified away by investing in both Avis Budget and CenterPoint 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 CenterPoint 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 CenterPoint Energy, you can compare the effects of market volatilities on Avis Budget and CenterPoint 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 CenterPoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and CenterPoint Energy.
Diversification Opportunities for Avis Budget and CenterPoint Energy
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Avis and CenterPoint is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint 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 CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of Avis Budget i.e., Avis Budget and CenterPoint Energy go up and down completely randomly.
Pair Corralation between Avis Budget and CenterPoint Energy
Considering the 90-day investment horizon Avis Budget Group is expected to under-perform the CenterPoint Energy. In addition to that, Avis Budget is 2.67 times more volatile than CenterPoint Energy. It trades about -0.01 of its total potential returns per unit of risk. CenterPoint Energy is currently generating about 0.02 per unit of volatility. If you would invest 2,933 in CenterPoint Energy on August 31, 2024 and sell it today you would earn a total of 333.00 from holding CenterPoint Energy or generate 11.35% 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. CenterPoint Energy
Performance |
| Timeline |
| Avis Budget Group |
| CenterPoint Energy |
Avis Budget and CenterPoint Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avis Budget and CenterPoint Energy
The main advantage of trading using opposite Avis Budget and CenterPoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget position performs unexpectedly, CenterPoint 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 CenterPoint Energy will offset losses from the drop in CenterPoint Energy'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 |
| CenterPoint Energy vs. CMS Energy | CenterPoint Energy vs. IDACORP | CenterPoint Energy vs. Portland General Electric |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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