Correlation Between Avis Budget and WILLIS LEASE

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

Diversification Opportunities for Avis Budget and WILLIS LEASE

0.08

Correlation Coefficient

Avis Budget  WILLIS LEASE

Significant diversification

The 3 months correlation between Avis and WILLIS is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and WILLIS LEASE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WILLIS LEASE FIN 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 WILLIS LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WILLIS LEASE FIN has no effect on the direction of Avis Budget i.e., Avis Budget and WILLIS LEASE go up and down completely randomly.

Pair Corralation between Avis Budget and WILLIS LEASE

Assuming the 90 days trading horizon Avis Budget Group is expected to under-perform the WILLIS LEASE. In addition to that, Avis Budget is 1.12 times more volatile than WILLIS LEASE FIN. It trades about -0.14 of its total potential returns per unit of risk. WILLIS LEASE FIN is currently generating about -0.06 per unit of volatility. If you would invest  19,575  in WILLIS LEASE FIN on November 29, 2024 and sell it today you would lose (2,175) from holding WILLIS LEASE FIN or give up 11.11% of portfolio value over 90 days.

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

Avis Budget Group  vs.  WILLIS LEASE FIN

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. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

WILLIS LEASE FIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days WILLIS LEASE FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Avis Budget and WILLIS LEASE

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

The idea behind Avis Budget Group and WILLIS LEASE FIN 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.