Correlation Between AVIS BUDGET and WESTLAKE CHEMICAL

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

Diversification Opportunities for AVIS BUDGET and WESTLAKE CHEMICAL

-0.24

Correlation Coefficient

AVIS BUDGET  WESTLAKE CHEMICAL

Very good diversification

The 3 months correlation between AVIS and WESTLAKE is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding AVIS BUDGET GROUP and WESTLAKE CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTLAKE CHEMICAL 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 WESTLAKE CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTLAKE CHEMICAL has no effect on the direction of AVIS BUDGET i.e., AVIS BUDGET and WESTLAKE CHEMICAL go up and down completely randomly.

Pair Corralation between AVIS BUDGET and WESTLAKE CHEMICAL

Assuming the 90 days trading horizon AVIS BUDGET GROUP is expected to under-perform the WESTLAKE CHEMICAL. In addition to that, AVIS BUDGET is 1.95 times more volatile than WESTLAKE CHEMICAL. It trades about -0.04 of its total potential returns per unit of risk. WESTLAKE CHEMICAL is currently generating about 0.16 per unit of volatility. If you would invest  12,800  in WESTLAKE CHEMICAL on January 31, 2024 and sell it today you would earn a total of  1,100  from holding WESTLAKE CHEMICAL or generate 8.59% return on investment over 90 days.

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

AVIS BUDGET GROUP  vs.  WESTLAKE CHEMICAL

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 fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

WESTLAKE CHEMICAL

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with AVIS BUDGET and WESTLAKE CHEMICAL

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

The idea behind AVIS BUDGET GROUP and WESTLAKE CHEMICAL 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.