Correlation Between Avis Budget and NETGEAR

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

Diversification Opportunities for Avis Budget and NETGEAR

0.71

Correlation Coefficient

Avis Budget  NETGEAR

Poor diversification

The 3 months correlation between Avis and NETGEAR is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Avis Budget i.e., Avis Budget and NETGEAR go up and down completely randomly.

Pair Corralation between Avis Budget and NETGEAR

Considering the 90-day investment horizon Avis Budget Group is expected to under-perform the NETGEAR. In addition to that, Avis Budget is 1.47 times more volatile than NETGEAR. It trades about -0.08 of its total potential returns per unit of risk. NETGEAR is currently generating about -0.05 per unit of volatility. If you would invest  2,769  in NETGEAR on December 28, 2024 and sell it today you would lose (286.00) from holding NETGEAR or give up 10.33% of portfolio value over 90 days.

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

Avis Budget Group  vs.  NETGEAR

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 abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Avis Budget and NETGEAR

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

The idea behind Avis Budget Group and NETGEAR 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..