Correlation Between Avis Budget and Kimberly Clark

Can any of the company-specific risk be diversified away by investing in both Avis Budget and Kimberly Clark 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 Kimberly Clark 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 Kimberly Clark de Mxico, you can compare the effects of market volatilities on Avis Budget and Kimberly Clark 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 Kimberly Clark. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avis Budget and Kimberly Clark.

Diversification Opportunities for Avis Budget and Kimberly Clark

-0.47

Correlation Coefficient

Avis Budget  Kimberly Clark

Very good diversification

The 3 months correlation between Avis and Kimberly is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and Kimberly Clark de Mxico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimberly Clark de 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 Kimberly Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimberly Clark de has no effect on the direction of Avis Budget i.e., Avis Budget and Kimberly Clark go up and down completely randomly.

Pair Corralation between Avis Budget and Kimberly Clark

Assuming the 90 days trading horizon Avis Budget Group is expected to under-perform the Kimberly Clark. In addition to that, Avis Budget is 3.98 times more volatile than Kimberly Clark de Mxico. It trades about -0.03 of its total potential returns per unit of risk. Kimberly Clark de Mxico is currently generating about 0.04 per unit of volatility. If you would invest  2,848  in Kimberly Clark de Mxico on October 22, 2024 and sell it today you would earn a total of  84.00  from holding Kimberly Clark de Mxico or generate 2.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Avis Budget Group  vs.  Kimberly Clark de Mxico

Avis Budget Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avis Budget Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Kimberly Clark de

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kimberly Clark de Mxico are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Kimberly Clark is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Avis Budget and Kimberly Clark

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

The idea behind Avis Budget Group and Kimberly Clark de Mxico 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.