Correlation Between Avis Budget and Solstad Offshore

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

Diversification Opportunities for Avis Budget and Solstad Offshore

0.0

Correlation Coefficient

Avis Budget  Solstad Offshore

Pay attention - limited upside

The 3 months correlation between Avis and Solstad is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Avis Budget i.e., Avis Budget and Solstad Offshore go up and down completely randomly.

Pair Corralation between Avis Budget and Solstad Offshore

Considering the 90-day investment horizon Avis Budget Group is expected to under-perform the Solstad Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Avis Budget Group is 1.72 times less risky than Solstad Offshore. The stock trades about -0.06 of its potential returns per unit of risk. The Solstad Offshore ASA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  151.00  in Solstad Offshore ASA on September 21, 2024 and sell it today you would earn a total of  158.00  from holding Solstad Offshore ASA or generate 104.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

Avis Budget Group  vs.  Solstad Offshore ASA

Avis Budget Group

Risk-Adjusted Performance

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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.

Solstad Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solstad Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Solstad Offshore is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Avis Budget and Solstad Offshore

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

The idea behind Avis Budget Group and Solstad Offshore ASA 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 Anywhere module to track or share privately all of your investments from the convenience of any device.