Correlation Between AerCap Holdings and Avis Budget

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

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

Diversification Opportunities for AerCap Holdings and Avis Budget

-0.5

Correlation Coefficient

AerCap Holdings  Avis Budget

Very good diversification

The 3 months correlation between AerCap and Avis is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding AerCap Holdings NV 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 AerCap Holdings 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 AerCap Holdings NV 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 AerCap Holdings i.e., AerCap Holdings and Avis Budget go up and down completely randomly.

Pair Corralation between AerCap Holdings and Avis Budget

Considering the 90-day investment horizon AerCap Holdings NV is expected to generate 0.56 times more return on investment than Avis Budget. However, AerCap Holdings NV is 1.8 times less risky than Avis Budget. It trades about 0.03 of its potential returns per unit of risk. Avis Budget Group is currently generating about -0.3 per unit of risk. If you would invest  8,559  in AerCap Holdings NV on January 25, 2024 and sell it today you would earn a total of  54.00  from holding AerCap Holdings NV or generate 0.63% return on investment over 90 days.

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

AerCap Holdings NV  vs.  Avis Budget Group

AerCap Holdings NV

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, AerCap Holdings may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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. 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 May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with AerCap Holdings and Avis Budget

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