Correlation Between Avis Budget and Space Communication

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

Diversification Opportunities for Avis Budget and Space Communication

0.0

Correlation Coefficient

Avis Budget  Space Communication

Pay attention - limited upside

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

Pair Corralation between Avis Budget and Space Communication

Considering the 90-day investment horizon Avis Budget Group is expected to generate 0.82 times more return on investment than Space Communication. However, Avis Budget Group is 1.22 times less risky than Space Communication. It trades about -0.04 of its potential returns per unit of risk. Space Communication is currently generating about -0.05 per unit of risk. If you would invest  21,014  in Avis Budget Group on September 17, 2024 and sell it today you would lose (12,012) from holding Avis Budget Group or give up 57.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Avis Budget Group  vs.  Space Communication

Avis Budget Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avis Budget Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Avis Budget may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Space Communication

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Avis Budget and Space Communication

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

The idea behind Avis Budget Group and Space Communication 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.