Correlation Between Avis Budget and ELEMENT FLEET

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

Diversification Opportunities for Avis Budget and ELEMENT FLEET

0.5

Correlation Coefficient

Avis Budget  ELEMENT FLEET

Very weak diversification

The 3 months correlation between Avis and ELEMENT is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and ELEMENT FLEET MGMT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELEMENT FLEET MGMT 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 ELEMENT FLEET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELEMENT FLEET MGMT has no effect on the direction of Avis Budget i.e., Avis Budget and ELEMENT FLEET go up and down completely randomly.

Pair Corralation between Avis Budget and ELEMENT FLEET

Assuming the 90 days trading horizon Avis Budget Group is expected to under-perform the ELEMENT FLEET. In addition to that, Avis Budget is 1.83 times more volatile than ELEMENT FLEET MGMT. It trades about -0.35 of its total potential returns per unit of risk. ELEMENT FLEET MGMT is currently generating about -0.12 per unit of volatility. If you would invest  1,970  in ELEMENT FLEET MGMT on September 23, 2024 and sell it today you would lose (80.00) from holding ELEMENT FLEET MGMT or give up 4.06% 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.  ELEMENT FLEET MGMT

Avis Budget Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avis Budget Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Avis Budget is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ELEMENT FLEET MGMT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ELEMENT FLEET MGMT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ELEMENT FLEET 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 ELEMENT FLEET

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

The idea behind Avis Budget Group and ELEMENT FLEET MGMT 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.