Correlation Between Centessa Pharmaceuticals and Avis Budget

Can any of the company-specific risk be diversified away by investing in both Centessa Pharmaceuticals and Avis Budget 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 Centessa Pharmaceuticals and Avis Budget into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Centessa Pharmaceuticals PLC and Avis Budget Group, you can compare the effects of market volatilities on Centessa Pharmaceuticals and Avis Budget 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 Centessa Pharmaceuticals with a short position of Avis Budget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centessa Pharmaceuticals and Avis Budget.

Diversification Opportunities for Centessa Pharmaceuticals and Avis Budget

0.1

Correlation Coefficient

Centessa Pharmaceuticals  Avis Budget

Average diversification

The 3 months correlation between Centessa and Avis is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Centessa Pharmaceuticals PLC and Avis Budget Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avis Budget Group and Centessa Pharmaceuticals 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 Centessa Pharmaceuticals PLC are associated (or correlated) with Avis Budget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avis Budget Group has no effect on the direction of Centessa Pharmaceuticals i.e., Centessa Pharmaceuticals and Avis Budget go up and down completely randomly.

Pair Corralation between Centessa Pharmaceuticals and Avis Budget

Given the investment horizon of 90 days Centessa Pharmaceuticals PLC is expected to under-perform the Avis Budget. But the stock apears to be less risky and, when comparing its historical volatility, Centessa Pharmaceuticals PLC is 1.23 times less risky than Avis Budget. The stock trades about -0.03 of its potential returns per unit of risk. The Avis Budget Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  7,886  in Avis Budget Group on December 28, 2024 and sell it today you would lose (580.00) from holding Avis Budget Group or give up 7.35% of portfolio value over 90 days.

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

Centessa Pharmaceuticals PLC  vs.  Avis Budget Group

Centessa Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Centessa Pharmaceuticals PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

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.

Pair Trading with Centessa Pharmaceuticals and Avis Budget

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

The idea behind Centessa Pharmaceuticals PLC and Avis Budget Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.