Correlation Between United Rentals and Air New

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

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

Diversification Opportunities for United Rentals and Air New

-0.58

Correlation Coefficient

United Rentals  Air New

Excellent diversification

The 3 months correlation between United and Air is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Air New Zealand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air New Zealand 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 Air New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air New Zealand has no effect on the direction of United Rentals i.e., United Rentals and Air New go up and down completely randomly.

Pair Corralation between United Rentals and Air New

Considering the 90-day investment horizon United Rentals is expected to generate 0.56 times more return on investment than Air New. However, United Rentals is 1.79 times less risky than Air New. It trades about 0.18 of its potential returns per unit of risk. Air New Zealand is currently generating about -0.1 per unit of risk. If you would invest  69,926  in United Rentals on September 4, 2024 and sell it today you would earn a total of  15,779  from holding United Rentals or generate 22.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

United Rentals  vs.  Air New Zealand

United Rentals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, United Rentals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Air New Zealand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air New Zealand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with United Rentals and Air New

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

The idea behind United Rentals and Air New Zealand 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.