Correlation Between General Dynamics and Avis Budget

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

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

Diversification Opportunities for General Dynamics and Avis Budget

-0.41

Correlation Coefficient

General Dynamics  Avis Budget

Very good diversification

The 3 months correlation between General and Avis is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics 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 General Dynamics 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 General Dynamics 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 General Dynamics i.e., General Dynamics and Avis Budget go up and down completely randomly.

Pair Corralation between General Dynamics and Avis Budget

Allowing for the 90-day total investment horizon General Dynamics is expected to generate 0.36 times more return on investment than Avis Budget. However, General Dynamics is 2.8 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 -0.06 per unit of risk. If you would invest  25,828  in General Dynamics on January 7, 2025 and sell it today you would lose (1,052) from holding General Dynamics or give up 4.08% of portfolio value over 90 days.

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

General Dynamics  vs.  Avis Budget Group

General Dynamics

Risk-Adjusted Performance

Very Weak

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

Avis Budget Group

Risk-Adjusted Performance

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 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with General Dynamics and Avis Budget

The main advantage of trading using opposite General Dynamics and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Dynamics 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 General Dynamics 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.