Correlation Between UNITED RENTALS and Lendlease

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

By analyzing existing cross correlation between UNITED RENTALS and Lendlease Group, you can compare the effects of market volatilities on UNITED RENTALS and Lendlease 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 Lendlease. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED RENTALS and Lendlease.

Diversification Opportunities for UNITED RENTALS and Lendlease

-0.13

Correlation Coefficient

UNITED RENTALS  Lendlease

Good diversification

The 3 months correlation between UNITED and Lendlease is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and Lendlease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendlease Group 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 Lendlease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lendlease Group has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and Lendlease go up and down completely randomly.

Pair Corralation between UNITED RENTALS and Lendlease

Assuming the 90 days trading horizon UNITED RENTALS is expected to generate 1.41 times more return on investment than Lendlease. However, UNITED RENTALS is 1.41 times more volatile than Lendlease Group. It trades about 0.16 of its potential returns per unit of risk. Lendlease Group is currently generating about 0.07 per unit of risk. If you would invest  66,487  in UNITED RENTALS on September 1, 2024 and sell it today you would earn a total of  14,233  from holding UNITED RENTALS or generate 21.41% return on investment over 90 days.

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

UNITED RENTALS  vs.  Lendlease Group

UNITED RENTALS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UNITED RENTALS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, UNITED RENTALS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lendlease Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lendlease Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lendlease may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with UNITED RENTALS and Lendlease

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

The idea behind UNITED RENTALS and Lendlease Group 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.