Correlation Between Avis Budget and Arca Continental

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

Diversification Opportunities for Avis Budget and Arca Continental

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Avis and Arca is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB 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 Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of Avis Budget i.e., Avis Budget and Arca Continental go up and down completely randomly.

Pair Corralation between Avis Budget and Arca Continental

Assuming the 90 days trading horizon Avis Budget Group is expected to generate 1.41 times more return on investment than Arca Continental. However, Avis Budget is 1.41 times more volatile than Arca Continental SAB. It trades about 0.09 of its potential returns per unit of risk. Arca Continental SAB is currently generating about -0.04 per unit of risk. If you would invest  184,075  in Avis Budget Group on March 4, 2024 and sell it today you would earn a total of  21,125  from holding Avis Budget Group or generate 11.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.39%
ValuesDaily Returns

Avis Budget Group  vs.  Arca Continental SAB

 Performance 
       Timeline  
Avis Budget Group 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Avis Budget Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Avis Budget may actually be approaching a critical reversion point that can send shares even higher in July 2024.
Arca Continental SAB 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Arca Continental SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Arca Continental is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Avis Budget and Arca Continental Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Avis Budget and Arca Continental

The main advantage of trading using opposite Avis Budget and Arca Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avis Budget position performs unexpectedly, Arca Continental 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 Arca Continental will offset losses from the drop in Arca Continental's long position.
The idea behind Avis Budget Group and Arca Continental SAB 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.

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