Correlation Between Air Lease and Avis Budget

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

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

Diversification Opportunities for Air Lease and Avis Budget

0.9

Correlation Coefficient

Air Lease  Avis Budget

Almost no diversification

The 3 months correlation between Air and Avis is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease 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 Air Lease 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 Air Lease 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 Air Lease i.e., Air Lease and Avis Budget go up and down completely randomly.

Pair Corralation between Air Lease and Avis Budget

Allowing for the 90-day total investment horizon Air Lease is expected to generate 2.54 times less return on investment than Avis Budget. But when comparing it to its historical volatility, Air Lease is 2.28 times less risky than Avis Budget. It trades about 0.16 of its potential returns per unit of risk. Avis Budget Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,531  in Avis Budget Group on September 1, 2024 and sell it today you would earn a total of  3,376  from holding Avis Budget Group or generate 44.83% return on investment over 90 days.

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

Air Lease  vs.  Avis Budget Group

Air Lease

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, Air Lease disclosed solid returns over the last few months and may actually be approaching a breakup point.

Avis Budget Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avis Budget Group are ranked lower than 14 (%) 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 Air Lease and Avis Budget

The main advantage of trading using opposite Air Lease and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Lease 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 Air Lease 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.