Correlation Between United Rentals and Acadia Realty

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

By analyzing existing cross correlation between United Rentals and Acadia Realty Trust, you can compare the effects of market volatilities on United Rentals and Acadia Realty 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 Acadia Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Acadia Realty.

Diversification Opportunities for United Rentals and Acadia Realty

0.6

Correlation Coefficient

United Rentals  Acadia Realty

Poor diversification

The 3 months correlation between United and Acadia is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Acadia Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acadia Realty Trust 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 Acadia Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acadia Realty Trust has no effect on the direction of United Rentals i.e., United Rentals and Acadia Realty go up and down completely randomly.

Pair Corralation between United Rentals and Acadia Realty

Assuming the 90 days horizon United Rentals is expected to generate 1.09 times more return on investment than Acadia Realty. However, United Rentals is 1.09 times more volatile than Acadia Realty Trust. It trades about 0.31 of its potential returns per unit of risk. Acadia Realty Trust is currently generating about -0.22 per unit of risk. If you would invest  68,120  in United Rentals on October 25, 2024 and sell it today you would earn a total of  7,420  from holding United Rentals or generate 10.89% 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.  Acadia Realty Trust

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.

Acadia Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with United Rentals and Acadia Realty

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

The idea behind United Rentals and Acadia Realty Trust 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.