Correlation Between Apartment Investment and United Rentals

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

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

Diversification Opportunities for Apartment Investment and United Rentals

0.46

Correlation Coefficient

Apartment Investment  United Rentals

Very weak diversification

The 3 months correlation between Apartment and United is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Apartment Investment and and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Apartment Investment 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 Apartment Investment and 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 Apartment Investment i.e., Apartment Investment and United Rentals go up and down completely randomly.

Pair Corralation between Apartment Investment and United Rentals

Assuming the 90 days trading horizon Apartment Investment is expected to generate 1.89 times less return on investment than United Rentals. But when comparing it to its historical volatility, Apartment Investment and is 1.52 times less risky than United Rentals. It trades about 0.05 of its potential returns per unit of risk. United Rentals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  12,867  in United Rentals on September 29, 2024 and sell it today you would earn a total of  2,970  from holding United Rentals or generate 23.08% return on investment over 90 days.

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

Apartment Investment and  vs.  United Rentals

Apartment Investment and

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Apartment Investment and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Apartment Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

United Rentals

Risk-Adjusted Performance

2 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, United Rentals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Apartment Investment and United Rentals

The main advantage of trading using opposite Apartment Investment and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apartment Investment 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 Apartment Investment and 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.