Correlation Between United Rentals and BOC Aviation

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

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

Diversification Opportunities for United Rentals and BOC Aviation

-0.7

Correlation Coefficient

United Rentals  BOC Aviation

Excellent diversification

The 3 months correlation between United and BOC is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and BOC Aviation Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOC Aviation Limited 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 BOC Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOC Aviation Limited has no effect on the direction of United Rentals i.e., United Rentals and BOC Aviation go up and down completely randomly.

Pair Corralation between United Rentals and BOC Aviation

Considering the 90-day investment horizon United Rentals is expected to under-perform the BOC Aviation. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 1.67 times less risky than BOC Aviation. The stock trades about -0.18 of its potential returns per unit of risk. The BOC Aviation Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  784.00  in BOC Aviation Limited on September 17, 2024 and sell it today you would earn a total of  21.00  from holding BOC Aviation Limited or generate 2.68% return on investment over 90 days.

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

United Rentals  vs.  BOC Aviation Limited

United Rentals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, United Rentals is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

BOC Aviation Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BOC Aviation Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with United Rentals and BOC Aviation

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

The idea behind United Rentals and BOC Aviation Limited 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.