Correlation Between Avis Budget and DTE Energy
Can any of the company-specific risk be diversified away by investing in both Avis Budget and DTE 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 DTE 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 DTE Energy, you can compare the effects of market volatilities on Avis Budget and DTE 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 DTE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and DTE Energy.
Diversification Opportunities for Avis Budget and DTE Energy
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Avis and DTE is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE 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 DTE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTE Energy has no effect on the direction of Avis Budget i.e., Avis Budget and DTE Energy go up and down completely randomly.
Pair Corralation between Avis Budget and DTE Energy
Considering the 90-day investment horizon Avis Budget Group is expected to generate 4.22 times more return on investment than DTE Energy. However, Avis Budget is 4.22 times more volatile than DTE Energy. It trades about 0.18 of its potential returns per unit of risk. DTE Energy is currently generating about -0.05 per unit of risk. If you would invest 7,531 in Avis Budget Group on September 2, 2024 and sell it today you would earn a total of 3,376 from holding Avis Budget Group or generate 44.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avis Budget Group vs. DTE Energy
Performance |
| Timeline |
| Avis Budget Group |
| DTE Energy |
Avis Budget and DTE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avis Budget and DTE Energy
The main advantage of trading using opposite Avis Budget and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget position performs unexpectedly, DTE 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 DTE Energy will offset losses from the drop in DTE 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 |
| DTE Energy vs. Southern Company Series | DTE Energy vs. Southern Co | DTE Energy vs. DTE Energy Co | DTE Energy vs. Affiliated Managers Group, |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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