Correlation Between NETGEAR and Avis Budget

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

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

Diversification Opportunities for NETGEAR and Avis Budget

0.71

Correlation Coefficient

NETGEAR  Avis Budget

Poor diversification

The 3 months correlation between NETGEAR and Avis is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR 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 NETGEAR 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 NETGEAR 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 NETGEAR i.e., NETGEAR and Avis Budget go up and down completely randomly.

Pair Corralation between NETGEAR and Avis Budget

Given the investment horizon of 90 days NETGEAR is expected to generate 0.68 times more return on investment than Avis Budget. However, NETGEAR is 1.47 times less risky than Avis Budget. It trades about -0.05 of its potential returns per unit of risk. Avis Budget Group is currently generating about -0.08 per unit of risk. If you would invest  2,769  in NETGEAR on December 28, 2024 and sell it today you would lose (286.00) from holding NETGEAR or give up 10.33% of portfolio value over 90 days.

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

NETGEAR  vs.  Avis Budget Group

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail 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 abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with NETGEAR and Avis Budget

The main advantage of trading using opposite NETGEAR and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR 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 NETGEAR 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.