Correlation Between First Republic and Avis Budget

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

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

Diversification Opportunities for First Republic and Avis Budget

0.0

Correlation Coefficient

First Republic  Avis Budget

Pay attention - limited upside

The 3 months correlation between First and Avis is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank 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 First Republic 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 First Republic Bank 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 First Republic i.e., First Republic and Avis Budget go up and down completely randomly.

Pair Corralation between First Republic and Avis Budget

Assuming the 90 days trading horizon First Republic Bank is expected to under-perform the Avis Budget. In addition to that, First Republic is 1.99 times more volatile than Avis Budget Group. It trades about -0.08 of its total potential returns per unit of risk. Avis Budget Group is currently generating about -0.03 per unit of volatility. If you would invest  422,711  in Avis Budget Group on September 17, 2024 and sell it today you would lose (203,211) from holding Avis Budget Group or give up 48.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

First Republic Bank  vs.  Avis Budget Group

First Republic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Avis Budget Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avis Budget Group are ranked lower than 3 (%) 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 January 2025.

Pair Trading with First Republic and Avis Budget

The main advantage of trading using opposite First Republic and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Republic 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 First Republic Bank 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.