Correlation Between United Rentals and Augwind Energy

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

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

Diversification Opportunities for United Rentals and Augwind Energy

0.67

Correlation Coefficient

United Rentals  Augwind Energy

Poor diversification

The 3 months correlation between United and Augwind is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Augwind Energy Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Augwind Energy Tech 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 Augwind Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Augwind Energy Tech has no effect on the direction of United Rentals i.e., United Rentals and Augwind Energy go up and down completely randomly.

Pair Corralation between United Rentals and Augwind Energy

Considering the 90-day investment horizon United Rentals is expected to generate 8.4 times less return on investment than Augwind Energy. But when comparing it to its historical volatility, United Rentals is 4.14 times less risky than Augwind Energy. It trades about 0.18 of its potential returns per unit of risk. Augwind Energy Tech is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  19,040  in Augwind Energy Tech on September 3, 2024 and sell it today you would earn a total of  44,570  from holding Augwind Energy Tech or generate 234.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	71.88%
Values	Daily Returns

United Rentals  vs.  Augwind Energy Tech

United Rentals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, United Rentals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Augwind Energy Tech

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Augwind Energy Tech are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Augwind Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and Augwind Energy

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

The idea behind United Rentals and Augwind Energy Tech 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.