Correlation Between Avis Budget and UnitedHealth Group

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

Diversification Opportunities for Avis Budget and UnitedHealth Group

0.31

Correlation Coefficient

Avis Budget  UnitedHealth Group

Weak diversification

The 3 months correlation between Avis and UnitedHealth is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group 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 UnitedHealth Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UnitedHealth Group has no effect on the direction of Avis Budget i.e., Avis Budget and UnitedHealth Group go up and down completely randomly.

Pair Corralation between Avis Budget and UnitedHealth Group

Assuming the 90 days trading horizon Avis Budget Group is expected to under-perform the UnitedHealth Group. In addition to that, Avis Budget is 2.03 times more volatile than UnitedHealth Group Incorporated. It trades about -0.04 of its total potential returns per unit of risk. UnitedHealth Group Incorporated is currently generating about -0.05 per unit of volatility. If you would invest  1,143,595  in UnitedHealth Group Incorporated on October 9, 2024 and sell it today you would lose (103,731) from holding UnitedHealth Group Incorporated or give up 9.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Avis Budget Group  vs.  UnitedHealth Group Incorporate

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 unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

UnitedHealth Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Avis Budget and UnitedHealth Group

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

The idea behind Avis Budget Group and UnitedHealth Group Incorporated 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.