Correlation Between Biodexa Pharmaceticals and Avis Budget

Can any of the company-specific risk be diversified away by investing in both Biodexa Pharmaceticals 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 Biodexa Pharmaceticals and Avis Budget into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Biodexa Pharmaceticals and Avis Budget Group, you can compare the effects of market volatilities on Biodexa Pharmaceticals 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 Biodexa Pharmaceticals with a short position of Avis Budget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biodexa Pharmaceticals and Avis Budget.

Diversification Opportunities for Biodexa Pharmaceticals and Avis Budget

-0.71

Correlation Coefficient

Biodexa Pharmaceticals  Avis Budget

Pay attention - limited upside

The 3 months correlation between Biodexa and Avis is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Biodexa Pharmaceticals 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 Biodexa Pharmaceticals 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 Biodexa Pharmaceticals 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 Biodexa Pharmaceticals i.e., Biodexa Pharmaceticals and Avis Budget go up and down completely randomly.

Pair Corralation between Biodexa Pharmaceticals and Avis Budget

Given the investment horizon of 90 days Biodexa Pharmaceticals is expected to under-perform the Avis Budget. In addition to that, Biodexa Pharmaceticals is 3.41 times more volatile than Avis Budget Group. It trades about -0.04 of its total potential returns per unit of risk. Avis Budget Group is currently generating about 0.18 per unit of volatility. If you would invest  7,027  in Avis Budget Group on September 12, 2024 and sell it today you would earn a total of  3,022  from holding Avis Budget Group or generate 43.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Biodexa Pharmaceticals  vs.  Avis Budget Group

Biodexa Pharmaceticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biodexa Pharmaceticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Avis Budget Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avis Budget Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Avis Budget reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biodexa Pharmaceticals and Avis Budget

The main advantage of trading using opposite Biodexa Pharmaceticals and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biodexa Pharmaceticals 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 Biodexa Pharmaceticals 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.