Correlation Between Alcoa Corp and United Rentals

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Can any of the company-specific risk be diversified away by investing in both Alcoa Corp 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 Alcoa Corp and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and United Rentals, you can compare the effects of market volatilities on Alcoa Corp 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 Alcoa Corp with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and United Rentals.

Diversification Opportunities for Alcoa Corp and United Rentals

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Alcoa and United is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp i.e., Alcoa Corp and United Rentals go up and down completely randomly.

Pair Corralation between Alcoa Corp and United Rentals

Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the United Rentals. In addition to that, Alcoa Corp is 1.9 times more volatile than United Rentals. It trades about -0.46 of its total potential returns per unit of risk. United Rentals is currently generating about -0.37 per unit of volatility. If you would invest  31,957  in United Rentals on June 26, 2022 and sell it today you would lose (5,620)  from holding United Rentals or give up 17.59% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Alcoa Corp  vs.  United Rentals

 Performance (%) 
       Timeline  
Alcoa Corp 
Alcoa Performance
0 of 100
Over the last 90 days Alcoa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Alcoa Price Channel

United Rentals 
United Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, United Rentals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

United Price Channel

Alcoa Corp and United Rentals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alcoa Corp and United Rentals

The main advantage of trading using opposite Alcoa Corp and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp 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.
Alcoa Corp vs. Industrias Bachoco SA
The idea behind Alcoa Corp and United Rentals 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.
United Rentals vs. Industrias Bachoco SA
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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