Correlation Between CenterPoint Energy and Avis Budget
Can any of the company-specific risk be diversified away by investing in both CenterPoint Energy 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 CenterPoint Energy and Avis Budget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CenterPoint Energy and Avis Budget Group, you can compare the effects of market volatilities on CenterPoint Energy 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 CenterPoint Energy with a short position of Avis Budget. Check out your portfolio center. Please also check ongoing floating volatility patterns of CenterPoint Energy and Avis Budget.
Diversification Opportunities for CenterPoint Energy and Avis Budget
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CenterPoint and Avis is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy 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 CenterPoint Energy 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 CenterPoint Energy 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 CenterPoint Energy i.e., CenterPoint Energy and Avis Budget go up and down completely randomly.
Pair Corralation between CenterPoint Energy and Avis Budget
Considering the 90-day investment horizon CenterPoint Energy is expected to generate 2.5 times less return on investment than Avis Budget. But when comparing it to its historical volatility, CenterPoint Energy is 2.57 times less risky than Avis Budget. It trades about 0.24 of its potential returns per unit of risk. Avis Budget Group is currently generating about 0.24 of returns per unit of risk over similar time horizon. 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 |
CenterPoint Energy vs. Avis Budget Group
Performance |
| Timeline |
| CenterPoint Energy |
| Avis Budget Group |
CenterPoint Energy and Avis Budget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CenterPoint Energy and Avis Budget
The main advantage of trading using opposite CenterPoint Energy and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint Energy 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.| CenterPoint Energy vs. Entergy | CenterPoint Energy vs. Ameren Corp | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Pinnacle West Capital |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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