Correlation Between Willis Lease and United Rentals

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

By analyzing existing cross correlation between Willis Lease Finance and United Rentals, you can compare the effects of market volatilities on Willis Lease and United Rentals 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 Willis Lease with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willis Lease and United Rentals.

Diversification Opportunities for Willis Lease and United Rentals

0.47

Correlation Coefficient

Willis Lease  United Rentals

Very weak diversification

The 3 months correlation between Willis and United is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Willis Lease Finance and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Willis Lease 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 Willis Lease Finance are associated (or correlated) with United Rentals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals has no effect on the direction of Willis Lease i.e., Willis Lease and United Rentals go up and down completely randomly.

Pair Corralation between Willis Lease and United Rentals

Given the investment horizon of 90 days Willis Lease Finance is expected to under-perform the United Rentals. In addition to that, Willis Lease is 1.53 times more volatile than United Rentals. It trades about -0.07 of its total potential returns per unit of risk. United Rentals is currently generating about -0.05 per unit of volatility. If you would invest  70,431  in United Rentals on December 29, 2024 and sell it today you would lose (5,839) from holding United Rentals or give up 8.29% of portfolio value over 90 days.

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

Willis Lease Finance  vs.  United Rentals

Willis Lease Finance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Willis Lease Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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.

Pair Trading with Willis Lease and United Rentals

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

The idea behind Willis Lease Finance and United Rentals 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.