Correlation Between Socket Mobile and Avis Budget

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

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

Diversification Opportunities for Socket Mobile and Avis Budget

0.47

Correlation Coefficient

Socket Mobile  Avis Budget

Very weak diversification

The 3 months correlation between Socket and Avis is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Socket Mobile 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 Socket Mobile 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 Socket Mobile 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 Socket Mobile i.e., Socket Mobile and Avis Budget go up and down completely randomly.

Pair Corralation between Socket Mobile and Avis Budget

Given the investment horizon of 90 days Socket Mobile is expected to generate 0.98 times more return on investment than Avis Budget. However, Socket Mobile is 1.02 times less risky than Avis Budget. It trades about 0.0 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  193.00  in Socket Mobile on October 21, 2024 and sell it today you would lose (44.00) from holding Socket Mobile or give up 22.8% of portfolio value over 90 days.

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

Socket Mobile  vs.  Avis Budget Group

Socket Mobile

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Socket Mobile are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward-looking signals, Socket Mobile unveiled solid returns over the last few months and may actually be approaching a breakup point.

Avis Budget Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avis Budget Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Avis Budget reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Socket Mobile and Avis Budget

The main advantage of trading using opposite Socket Mobile and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Socket Mobile 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 Socket Mobile 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.