Correlation Between Avis Budget and Valeura Energy
Can any of the company-specific risk be diversified away by investing in both Avis Budget and Valeura 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 Valeura 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 Valeura Energy, you can compare the effects of market volatilities on Avis Budget and Valeura 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 Valeura Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and Valeura Energy.
Diversification Opportunities for Avis Budget and Valeura Energy
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Avis and Valeura is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura 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 Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of Avis Budget i.e., Avis Budget and Valeura Energy go up and down completely randomly.
Pair Corralation between Avis Budget and Valeura Energy
Considering the 90-day investment horizon Avis Budget Group is expected to under-perform the Valeura Energy. But the stock apears to be less risky and, when comparing its historical volatility, Avis Budget Group is 1.22 times less risky than Valeura Energy. The stock trades about -0.03 of its potential returns per unit of risk. The Valeura Energy is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 391.00 in Valeura Energy on September 13, 2024 and sell it today you would earn a total of 76.00 from holding Valeura Energy or generate 19.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Avis Budget Group vs. Valeura Energy
Performance |
| Timeline |
| Avis Budget Group |
| Valeura Energy |
Avis Budget and Valeura Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avis Budget and Valeura Energy
The main advantage of trading using opposite Avis Budget and Valeura Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget position performs unexpectedly, Valeura 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 Valeura Energy will offset losses from the drop in Valeura 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 |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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