Correlation Between Avis Budget and Goldman Sachs

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

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

Diversification Opportunities for Avis Budget and Goldman Sachs

0.19

Correlation Coefficient

Avis Budget  Goldman Sachs

Average diversification

The 3 months correlation between Avis and Goldman is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs and Avis Budget 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 Avis Budget Group are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs has no effect on the direction of Avis Budget i.e., Avis Budget and Goldman Sachs go up and down completely randomly.

Pair Corralation between Avis Budget and Goldman Sachs

Assuming the 90 days trading horizon Avis Budget Group is expected to under-perform the Goldman Sachs. In addition to that, Avis Budget is 1.67 times more volatile than The Goldman Sachs. It trades about -0.03 of its total potential returns per unit of risk. The Goldman Sachs is currently generating about 0.08 per unit of volatility. If you would invest  635,474  in The Goldman Sachs on September 17, 2024 and sell it today you would earn a total of  543,126  from holding The Goldman Sachs or generate 85.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Avis Budget Group  vs.  The Goldman Sachs

Avis Budget Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avis Budget Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Avis Budget may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Goldman Sachs

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Goldman Sachs showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avis Budget and Goldman Sachs

The main advantage of trading using opposite Avis Budget and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget position performs unexpectedly, Goldman Sachs 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 Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.

The idea behind Avis Budget Group and The Goldman Sachs 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 CEOs Directory module to screen CEOs from public companies around the world.