Correlation Between CDW Corp and Avis Budget
Can any of the company-specific risk be diversified away by investing in both CDW Corp and Avis Budget 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 CDW Corp and Avis Budget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CDW Corp and Avis Budget Group, you can compare the effects of market volatilities on CDW Corp and Avis Budget 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 CDW Corp with a short position of Avis Budget. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDW Corp and Avis Budget.
Diversification Opportunities for CDW Corp and Avis Budget
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between CDW and Avis is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding CDW Corp and Avis Budget Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avis Budget Group and CDW Corp 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 CDW Corp are associated (or correlated) with Avis Budget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avis Budget Group has no effect on the direction of CDW Corp i.e., CDW Corp and Avis Budget go up and down completely randomly.
Pair Corralation between CDW Corp and Avis Budget
Considering the 90-day investment horizon CDW Corp is expected to under-perform the Avis Budget. But the stock apears to be less risky and, when comparing its historical volatility, CDW Corp is 2.08 times less risky than Avis Budget. The stock trades about -0.15 of its potential returns per unit of risk. The Avis Budget Group is currently generating about 0.34 of returns per unit of risk over similar time horizon. 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CDW Corp vs. Avis Budget Group
Performance |
| Timeline |
| CDW Corp |
| Avis Budget Group |
CDW Corp and Avis Budget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CDW Corp and Avis Budget
The main advantage of trading using opposite CDW Corp and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDW Corp position performs unexpectedly, Avis Budget 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 Avis Budget will offset losses from the drop in Avis Budget's long position.| CDW Corp vs. Desktop Metal | CDW Corp vs. Fabrinet | CDW Corp vs. Knowles Cor | CDW Corp vs. Ubiquiti Networks |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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