Correlation Between UNITED RENTALS and American Airlines
Can any of the company-specific risk be diversified away by investing in both UNITED RENTALS and American Airlines 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 American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UNITED RENTALS and American Airlines Group, you can compare the effects of market volatilities on UNITED RENTALS and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED RENTALS and American Airlines.
Diversification Opportunities for UNITED RENTALS and American Airlines
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between UNITED and American is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and American Airlines go up and down completely randomly.
Pair Corralation between UNITED RENTALS and American Airlines
Assuming the 90 days trading horizon UNITED RENTALS is expected to generate 1.29 times less return on investment than American Airlines. But when comparing it to its historical volatility, UNITED RENTALS is 1.15 times less risky than American Airlines. It trades about 0.17 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,257 in American Airlines Group on August 29, 2024 and sell it today you would earn a total of 154.00 from holding American Airlines Group or generate 12.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
UNITED RENTALS vs. American Airlines Group
Performance |
| Timeline |
| UNITED RENTALS |
| American Airlines |
UNITED RENTALS and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UNITED RENTALS and American Airlines
The main advantage of trading using opposite UNITED RENTALS and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED RENTALS position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| UNITED RENTALS vs. Laureate Education | UNITED RENTALS vs. Darden Restaurants | UNITED RENTALS vs. MEDICAL FACILITIES NEW | UNITED RENTALS vs. ScanSource |
| American Airlines vs. GRIFFIN MINING LTD | American Airlines vs. Corporate Office Properties | American Airlines vs. Zijin Mining Group | American Airlines vs. Perseus Mining Limited |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |