Correlation Between Avis Budget and BBB Foods
Can any of the company-specific risk be diversified away by investing in both Avis Budget and BBB Foods 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 BBB Foods 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 BBB Foods, you can compare the effects of market volatilities on Avis Budget and BBB Foods 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 BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and BBB Foods.
Diversification Opportunities for Avis Budget and BBB Foods
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Avis and BBB is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods 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 BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of Avis Budget i.e., Avis Budget and BBB Foods go up and down completely randomly.
Pair Corralation between Avis Budget and BBB Foods
Considering the 90-day investment horizon Avis Budget Group is expected to under-perform the BBB Foods. In addition to that, Avis Budget is 1.1 times more volatile than BBB Foods. It trades about -0.03 of its total potential returns per unit of risk. BBB Foods is currently generating about 0.09 per unit of volatility. If you would invest 1,750 in BBB Foods on November 2, 2024 and sell it today you would earn a total of 1,359 from holding BBB Foods or generate 77.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 49.8% |
| Values | Daily Returns |
Avis Budget Group vs. BBB Foods
Performance |
| Timeline |
| Avis Budget Group |
| BBB Foods |
Avis Budget and BBB Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avis Budget and BBB Foods
The main advantage of trading using opposite Avis Budget and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget position performs unexpectedly, BBB Foods 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 BBB Foods will offset losses from the drop in BBB Foods' long position.| Avis Budget vs. Hertz Global Hldgs | Avis Budget vs. Ryder System | Avis Budget vs. HE Equipment Services | Avis Budget vs. United Rentals |
| BBB Foods vs. Old Dominion Freight | BBB Foods vs. Delek Logistics Partners | BBB Foods vs. Weyco Group | BBB Foods vs. Radcom |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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