Correlation Between Avis Budget and Dave Busters

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

Diversification Opportunities for Avis Budget and Dave Busters

0.4

Correlation Coefficient

Avis Budget  Dave Busters

Very weak diversification

The 3 months correlation between Avis and Dave is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and Dave Busters Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dave Busters Enterta 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 Dave Busters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dave Busters Enterta has no effect on the direction of Avis Budget i.e., Avis Budget and Dave Busters go up and down completely randomly.

Pair Corralation between Avis Budget and Dave Busters

Considering the 90-day investment horizon Avis Budget Group is expected to under-perform the Dave Busters. But the stock apears to be less risky and, when comparing its historical volatility, Avis Budget Group is 3.03 times less risky than Dave Busters. The stock trades about -0.66 of its potential returns per unit of risk. The Dave Busters Entertainment is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  3,932  in Dave Busters Entertainment on September 30, 2024 and sell it today you would lose (1,018) from holding Dave Busters Entertainment or give up 25.89% of portfolio value over 90 days.

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

Avis Budget Group  vs.  Dave Busters Entertainment

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. 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.

Dave Busters Enterta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dave Busters Entertainment 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.

Pair Trading with Avis Budget and Dave Busters

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

The idea behind Avis Budget Group and Dave Busters Entertainment 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.