Correlation Between Avis Budget and Air Products

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

Diversification Opportunities for Avis Budget and Air Products

0.42

Correlation Coefficient

Avis Budget  Air Products

Very weak diversification

The 3 months correlation between Avis and Air is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Avis Budget Group and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Avis Budget i.e., Avis Budget and Air Products go up and down completely randomly.

Pair Corralation between Avis Budget and Air Products

Considering the 90-day investment horizon Avis Budget Group is expected to generate 2.15 times more return on investment than Air Products. However, Avis Budget is 2.15 times more volatile than Air Products and. It trades about 0.01 of its potential returns per unit of risk. Air Products and is currently generating about 0.01 per unit of risk. If you would invest  8,235  in Avis Budget Group on September 25, 2024 and sell it today you would lose (137.00) from holding Avis Budget Group or give up 1.66% of portfolio value over 90 days.

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

Avis Budget Group  vs.  Air Products and

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 relatively invariable basic indicators, Avis Budget is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Air Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Products and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Air Products is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Avis Budget and Air Products

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

The idea behind Avis Budget Group and Air Products and 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.