Correlation Between United Rentals and Lynas Rare

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

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

Diversification Opportunities for United Rentals and Lynas Rare

-0.62

Correlation Coefficient

United Rentals  Lynas Rare

Excellent diversification

The 3 months correlation between United and Lynas is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Lynas Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lynas Rare Earths 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 Lynas Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lynas Rare Earths has no effect on the direction of United Rentals i.e., United Rentals and Lynas Rare go up and down completely randomly.

Pair Corralation between United Rentals and Lynas Rare

Considering the 90-day investment horizon United Rentals is expected to under-perform the Lynas Rare. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 1.08 times less risky than Lynas Rare. The stock trades about -0.05 of its potential returns per unit of risk. The Lynas Rare Earths is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  397.00  in Lynas Rare Earths on December 28, 2024 and sell it today you would earn a total of  58.00  from holding Lynas Rare Earths or generate 14.61% 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.  Lynas Rare Earths

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.

Lynas Rare Earths

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lynas Rare Earths are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Lynas Rare reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and Lynas Rare

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

The idea behind United Rentals and Lynas Rare Earths 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.