Correlation Between Alaska Air and United Rentals
Can any of the company-specific risk be diversified away by investing in both Alaska Air 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 Alaska Air and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alaska Air Group, and United Rentals, you can compare the effects of market volatilities on Alaska Air 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 Alaska Air with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and United Rentals.
Diversification Opportunities for Alaska Air and United Rentals
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Alaska and United is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group, and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Alaska Air 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 Alaska Air Group, 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 Alaska Air i.e., Alaska Air and United Rentals go up and down completely randomly.
Pair Corralation between Alaska Air and United Rentals
Assuming the 90 days trading horizon Alaska Air is expected to generate 1.09 times less return on investment than United Rentals. In addition to that, Alaska Air is 1.0 times more volatile than United Rentals. It trades about 0.06 of its total potential returns per unit of risk. United Rentals is currently generating about 0.07 per unit of volatility. If you would invest 6,991 in United Rentals on October 11, 2024 and sell it today you would earn a total of 7,657 from holding United Rentals or generate 109.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Alaska Air Group, vs. United Rentals
Performance |
| Timeline |
| Alaska Air Group, |
| United Rentals |
Alaska Air and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and United Rentals
The main advantage of trading using opposite Alaska Air and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air 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.| Alaska Air vs. United Rentals | Alaska Air vs. Sumitomo Mitsui Financial | Alaska Air vs. salesforce inc | Alaska Air vs. Prudential Financial |
| United Rentals vs. T Mobile | United Rentals vs. Zoom Video Communications | United Rentals vs. Warner Music Group | United Rentals vs. Annaly Capital Management, |
Check out your portfolio center.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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