Correlation Between Avis Budget and HE Equipment
Can any of the company-specific risk be diversified away by investing in both Avis Budget and HE Equipment 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 HE Equipment 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 HE Equipment Services, you can compare the effects of market volatilities on Avis Budget and HE Equipment 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 HE Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and HE Equipment.
Diversification Opportunities for Avis Budget and HE Equipment
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Avis and HEES is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and HE Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HE Equipment Services 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 HE Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HE Equipment Services has no effect on the direction of Avis Budget i.e., Avis Budget and HE Equipment go up and down completely randomly.
Pair Corralation between Avis Budget and HE Equipment
Considering the 90-day investment horizon Avis Budget Group is expected to generate 1.21 times more return on investment than HE Equipment. However, Avis Budget is 1.21 times more volatile than HE Equipment Services. It trades about 0.34 of its potential returns per unit of risk. HE Equipment Services is currently generating about 0.21 per unit of risk. If you would invest 8,300 in Avis Budget Group on September 1, 2024 and sell it today you would earn a total of 2,607 from holding Avis Budget Group or generate 31.41% 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. HE Equipment Services
Performance |
| Timeline |
| Avis Budget Group |
| HE Equipment Services |
Avis Budget and HE Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avis Budget and HE Equipment
The main advantage of trading using opposite Avis Budget and HE Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget position performs unexpectedly, HE Equipment 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 HE Equipment will offset losses from the drop in HE Equipment'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 |
| HE Equipment vs. McGrath RentCorp | HE Equipment vs. Herc Holdings | HE Equipment vs. PROG Holdings | HE Equipment vs. Custom Truck One |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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