Correlation Between United Rentals and American Funds

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

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

Diversification Opportunities for United Rentals and American Funds

-0.43

Correlation Coefficient

United Rentals  American Funds

Very good diversification

The 3 months correlation between United and American is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and American Funds Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Capital 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Capital has no effect on the direction of United Rentals i.e., United Rentals and American Funds go up and down completely randomly.

Pair Corralation between United Rentals and American Funds

Considering the 90-day investment horizon United Rentals is expected to under-perform the American Funds. In addition to that, United Rentals is 4.29 times more volatile than American Funds Capital. It trades about -0.05 of its total potential returns per unit of risk. American Funds Capital is currently generating about 0.14 per unit of volatility. If you would invest  6,847  in American Funds Capital on December 29, 2024 and sell it today you would earn a total of  329.00  from holding American Funds Capital or generate 4.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

United Rentals  vs.  American Funds Capital

United Rentals

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

American Funds Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Capital are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Rentals and American Funds

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

The idea behind United Rentals and American Funds Capital 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.

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 the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.