Correlation Between Ford and Avis Budget
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Avis Budget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Avis Budget Group, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Avis Budget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Avis Budget.
Diversification Opportunities for Ford and Avis Budget
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and Avis is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Avis Budget go up and down completely randomly.
Pair Corralation between Ford and Avis Budget
Taking into account the 90-day investment horizon Ford is expected to generate 3.92 times less return on investment than Avis Budget. But when comparing it to its historical volatility, Ford Motor is 1.58 times less risky than Avis Budget. It trades about 0.13 of its potential returns per unit of risk. Avis Budget Group is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 8,080 in Avis Budget Group on October 22, 2024 and sell it today you would earn a total of 948.00 from holding Avis Budget Group or generate 11.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Avis Budget Group
Performance |
| Timeline |
| Ford Motor |
| Avis Budget Group |
Ford and Avis Budget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Avis Budget
The main advantage of trading using opposite Ford and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and Avis Budget Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Avis Budget vs. Molson Coors Beverage | Avis Budget vs. Impax Asset Management | Avis Budget vs. Tyson Foods Cl | Avis Budget vs. Monster Beverage Corp |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |