Correlation Between Air Transport and United Rentals
Can any of the company-specific risk be diversified away by investing in both Air Transport 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 Air Transport and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Transport Services and United Rentals, you can compare the effects of market volatilities on Air Transport 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 Air Transport with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and United Rentals.
Diversification Opportunities for Air Transport and United Rentals
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and United is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and United Rentals go up and down completely randomly.
Pair Corralation between Air Transport and United Rentals
Given the investment horizon of 90 days Air Transport Services is expected to generate 2.05 times more return on investment than United Rentals. However, Air Transport is 2.05 times more volatile than United Rentals. It trades about 0.15 of its potential returns per unit of risk. United Rentals is currently generating about 0.18 per unit of risk. If you would invest 1,569 in Air Transport Services on September 2, 2024 and sell it today you would earn a total of 627.00 from holding Air Transport Services or generate 39.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air Transport Services vs. United Rentals
Performance |
| Timeline |
| Air Transport Services |
| United Rentals |
Air Transport and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Transport and United Rentals
The main advantage of trading using opposite Air Transport and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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.| Air Transport vs. Copa Holdings SA | Air Transport vs. SkyWest | Air Transport vs. Sun Country Airlines | Air Transport vs. Frontier Group Holdings |
| United Rentals vs. HE Equipment Services | United Rentals vs. GATX Corporation | United Rentals vs. McGrath RentCorp | United Rentals vs. Alta Equipment Group |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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