Correlation Between Paylocity Holdings and Avis Budget

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Can any of the company-specific risk be diversified away by investing in both Paylocity Holdings 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 Paylocity Holdings and Avis Budget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paylocity Holdings Corp and Avis Budget Group, you can compare the effects of market volatilities on Paylocity Holdings 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 Paylocity Holdings with a short position of Avis Budget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paylocity Holdings and Avis Budget.

Diversification Opportunities for Paylocity Holdings and Avis Budget

-0.75
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Paylocity and Avis Budget is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Paylocity Holdings Corp 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 Paylocity Holdings 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 Paylocity Holdings Corp 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 Paylocity Holdings i.e., Paylocity Holdings and Avis Budget go up and down completely randomly.

Pair Corralation between Paylocity Holdings and Avis Budget

Given the investment horizon of 90 days Paylocity Holdings is expected to generate 9.21 times less return on investment than Avis Budget. But when comparing it to its historical volatility, Paylocity Holdings Corp is 2.23 times less risky than Avis Budget. It trades about 0.02 of its potential returns per unit of risk. Avis Budget Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,898  in Avis Budget Group on September 1, 2022 and sell it today you would earn a total of  18,084  from holding Avis Budget Group or generate 463.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Paylocity Holdings Corp  vs.  Avis Budget Group

 Performance (%) 
       Timeline  
Paylocity Holdings Corp 
Paylocity Performance
0 of 100
Over the last 90 days Paylocity Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest sluggish performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Paylocity Price Channel

Avis Budget Group 
Avis Budget Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Avis Budget Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Avis Budget reported solid returns over the last few months and may actually be approaching a breakup point.

Avis Budget Price Channel

Paylocity Holdings and Avis Budget Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Paylocity Holdings and Avis Budget

The main advantage of trading using opposite Paylocity Holdings and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paylocity Holdings 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.
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The idea behind Paylocity Holdings Corp 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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Check out your portfolio center. 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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