Correlation Between Global Ship and Avis Budget
Can any of the company-specific risk be diversified away by investing in both Global Ship 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 Global Ship and Avis Budget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Ship Lease and Avis Budget Group, you can compare the effects of market volatilities on Global Ship 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 Global Ship with a short position of Avis Budget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and Avis Budget.
Diversification Opportunities for Global Ship and Avis Budget
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Global and Avis is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease 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 Global Ship 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 Global Ship Lease 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 Global Ship i.e., Global Ship and Avis Budget go up and down completely randomly.
Pair Corralation between Global Ship and Avis Budget
Assuming the 90 days trading horizon Global Ship Lease is expected to under-perform the Avis Budget. But the preferred stock apears to be less risky and, when comparing its historical volatility, Global Ship Lease is 6.16 times less risky than Avis Budget. The preferred stock trades about 0.0 of its potential returns per unit of risk. The Avis Budget Group is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 8,544 in Avis Budget Group on August 29, 2024 and sell it today you would earn a total of 2,340 from holding Avis Budget Group or generate 27.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Ship Lease vs. Avis Budget Group
Performance |
| Timeline |
| Global Ship Lease |
| Avis Budget Group |
Global Ship and Avis Budget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Ship and Avis Budget
The main advantage of trading using opposite Global Ship and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship 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.| Global Ship vs. Safe Bulkers | Global Ship vs. Diana Shipping | Global Ship vs. Costamare | Global Ship vs. Safe Bulkers |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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