Correlation Between Hertz Global and Avis Budget

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

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

Diversification Opportunities for Hertz Global and Avis Budget

0.69

Correlation Coefficient

Hertz Global  Avis Budget

Poor diversification

The 3 months correlation between Hertz and Avis is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hertz Global Hldgs 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 Hertz Global 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 Hertz Global Hldgs 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 Hertz Global i.e., Hertz Global and Avis Budget go up and down completely randomly.

Pair Corralation between Hertz Global and Avis Budget

Assuming the 90 days horizon Hertz Global Hldgs is expected to generate 0.98 times more return on investment than Avis Budget. However, Hertz Global Hldgs is 1.02 times less risky than Avis Budget. It trades about 0.04 of its potential returns per unit of risk. Avis Budget Group is currently generating about -0.01 per unit of risk. If you would invest  215.00  in Hertz Global Hldgs on December 27, 2024 and sell it today you would earn a total of  11.00  from holding Hertz Global Hldgs or generate 5.12% return on investment over 90 days.

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

Hertz Global Hldgs  vs.  Avis Budget Group

Hertz Global Hldgs

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hertz Global Hldgs are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hertz Global may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Hertz Global and Avis Budget

The main advantage of trading using opposite Hertz Global and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hertz Global 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 Hertz Global Hldgs 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .