Correlation Between Avis Budget and United Rentals
Can any of the company-specific risk be diversified away by investing in both Avis Budget and United Rentals 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 United Rentals 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 United Rentals, you can compare the effects of market volatilities on Avis Budget and United Rentals 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 United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and United Rentals.
Diversification Opportunities for Avis Budget and United Rentals
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Avis and United is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals 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 United Rentals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals has no effect on the direction of Avis Budget i.e., Avis Budget and United Rentals go up and down completely randomly.
Pair Corralation between Avis Budget and United Rentals
Considering the 90-day investment horizon Avis Budget Group is expected to generate 1.53 times more return on investment than United Rentals. However, Avis Budget is 1.53 times more volatile than United Rentals. It trades about 0.24 of its potential returns per unit of risk. United Rentals is currently generating about 0.07 per unit of risk. If you would invest 8,544 in Avis Budget Group on August 27, 2024 and sell it today you would earn a total of 1,723 from holding Avis Budget Group or generate 20.17% 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. United Rentals
Performance |
| Timeline |
| Avis Budget Group |
| United Rentals |
Avis Budget and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avis Budget and United Rentals
The main advantage of trading using opposite Avis Budget and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget position performs unexpectedly, United Rentals 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 United Rentals will offset losses from the drop in United Rentals' long position.| Avis Budget vs. Hertz Global Hldgs | Avis Budget vs. Ryder System | Avis Budget vs. HE Equipment Services | Avis Budget vs. United Rentals |
| United Rentals vs. HE Equipment Services | United Rentals vs. GATX Corporation | United Rentals vs. McGrath RentCorp | United Rentals vs. Alta Equipment 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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