Correlation Between Avis Budget and Hertz Global

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

Diversification Opportunities for Avis Budget and Hertz Global

0.69

Correlation Coefficient

Avis Budget  Hertz Global

Poor diversification

The 3 months correlation between Avis and Hertz is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and Hertz Global Hldgs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hertz Global Hldgs 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 Hertz Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hertz Global Hldgs has no effect on the direction of Avis Budget i.e., Avis Budget and Hertz Global go up and down completely randomly.

Pair Corralation between Avis Budget and Hertz Global

Considering the 90-day investment horizon Avis Budget Group is expected to under-perform the Hertz Global. In addition to that, Avis Budget is 1.02 times more volatile than Hertz Global Hldgs. It trades about -0.01 of its total potential returns per unit of risk. Hertz Global Hldgs is currently generating about 0.04 per unit of volatility. If you would invest  215.00  in Hertz Global Hldgs on December 27, 2024 and sell it today you would earn a total of  11.00  from holding Hertz Global Hldgs or generate 5.12% return on investment over 90 days.

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

Avis Budget Group  vs.  Hertz Global Hldgs

Avis Budget Group

Risk-Adjusted Performance

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.

Hertz Global Hldgs

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Avis Budget and Hertz Global

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

The idea behind Avis Budget Group and Hertz Global Hldgs 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.