Correlation Between Turning Point and Avis Budget

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Can any of the company-specific risk be diversified away by investing in both Turning Point 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 Turning Point and Avis Budget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Turning Point Brands and Avis Budget Group, you can compare the effects of market volatilities on Turning Point 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 Turning Point with a short position of Avis Budget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Turning Point and Avis Budget.

Diversification Opportunities for Turning Point and Avis Budget

TurningAvisDiversified AwayTurningAvisDiversified Away100%
0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Turning and Avis is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Turning Point Brands 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 Turning Point 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 Turning Point Brands 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 Turning Point i.e., Turning Point and Avis Budget go up and down completely randomly.

Pair Corralation between Turning Point and Avis Budget

Considering the 90-day investment horizon Turning Point Brands is expected to generate 0.79 times more return on investment than Avis Budget. However, Turning Point Brands is 1.27 times less risky than Avis Budget. It trades about -0.14 of its potential returns per unit of risk. Avis Budget Group is currently generating about -0.57 per unit of risk. If you would invest  6,223  in Turning Point Brands on September 27, 2024 and sell it today you would lose (323.00) from holding Turning Point Brands or give up 5.19% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Turning Point Brands  vs.  Avis Budget Group

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -1001020304050
JavaScript chart by amCharts 3.21.15TPB CAR
       Timeline  
Turning Point Brands 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Turning Point Brands are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Turning Point sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecDec404550556065
Avis Budget Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Avis Budget Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Avis Budget is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.
JavaScript chart by amCharts 3.21.15NovDecDec80859095100105110

Turning Point and Avis Budget Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.14-4.6-3.06-1.52-0.02571.73.465.226.978.73 0.020.040.060.08
JavaScript chart by amCharts 3.21.15TPB CAR
       Returns  

Pair Trading with Turning Point and Avis Budget

The main advantage of trading using opposite Turning Point and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Turning Point 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 Turning Point Brands 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.
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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