Correlation Between Avis Budget and Banco Bilbao

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

Diversification Opportunities for Avis Budget and Banco Bilbao

-0.54

Correlation Coefficient

Avis Budget  Banco Bilbao

Excellent diversification

The 3 months correlation between Avis and Banco is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and Banco Bilbao Vizcaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bilbao Vizcaya 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 Banco Bilbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bilbao Vizcaya has no effect on the direction of Avis Budget i.e., Avis Budget and Banco Bilbao go up and down completely randomly.

Pair Corralation between Avis Budget and Banco Bilbao

Assuming the 90 days trading horizon Avis Budget Group is expected to generate 1.32 times more return on investment than Banco Bilbao. However, Avis Budget is 1.32 times more volatile than Banco Bilbao Vizcaya. It trades about 0.13 of its potential returns per unit of risk. Banco Bilbao Vizcaya is currently generating about 0.01 per unit of risk. If you would invest  188,974  in Avis Budget Group on February 15, 2024 and sell it today you would earn a total of  16,226  from holding Avis Budget Group or generate 8.59% return on investment over 90 days.

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

Avis Budget Group  vs.  Banco Bilbao Vizcaya

Avis Budget Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avis Budget Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Avis Budget is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Banco Bilbao Vizcaya

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bilbao Vizcaya are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Banco Bilbao may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Avis Budget and Banco Bilbao

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

The idea behind Avis Budget Group and Banco Bilbao Vizcaya 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.