Correlation Between United Rentals and AIR PRODCHEMICALS

Can any of the company-specific risk be diversified away by investing in both United Rentals and AIR PRODCHEMICALS 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 United Rentals and AIR PRODCHEMICALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United Rentals and AIR PRODCHEMICALS, you can compare the effects of market volatilities on United Rentals and AIR PRODCHEMICALS 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 United Rentals with a short position of AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and AIR PRODCHEMICALS.

Diversification Opportunities for United Rentals and AIR PRODCHEMICALS

0.75

Correlation Coefficient

United Rentals  AIR PRODCHEMICALS

Poor diversification

The 3 months correlation between United and AIR is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS and United Rentals 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 United Rentals are associated (or correlated) with AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of United Rentals i.e., United Rentals and AIR PRODCHEMICALS go up and down completely randomly.

Pair Corralation between United Rentals and AIR PRODCHEMICALS

Assuming the 90 days horizon United Rentals is expected to generate 1.38 times more return on investment than AIR PRODCHEMICALS. However, United Rentals is 1.38 times more volatile than AIR PRODCHEMICALS. It trades about 0.06 of its potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about 0.04 per unit of risk. If you would invest  51,687  in United Rentals on September 24, 2024 and sell it today you would earn a total of  17,133  from holding United Rentals or generate 33.15% return on investment over 90 days.

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

United Rentals  vs.  AIR PRODCHEMICALS

United Rentals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, United Rentals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AIR PRODCHEMICALS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AIR PRODCHEMICALS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, AIR PRODCHEMICALS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United Rentals and AIR PRODCHEMICALS

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

The idea behind United Rentals and AIR PRODCHEMICALS 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.