Correlation Between United Rentals and Aeva Technologies

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

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

Diversification Opportunities for United Rentals and Aeva Technologies

0.13

Correlation Coefficient

United Rentals  Aeva Technologies

Average diversification

The 3 months correlation between United and Aeva is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Aeva Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeva Technologies 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 Aeva Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeva Technologies has no effect on the direction of United Rentals i.e., United Rentals and Aeva Technologies go up and down completely randomly.

Pair Corralation between United Rentals and Aeva Technologies

Considering the 90-day investment horizon United Rentals is expected to generate 0.37 times more return on investment than Aeva Technologies. However, United Rentals is 2.71 times less risky than Aeva Technologies. It trades about 0.01 of its potential returns per unit of risk. Aeva Technologies is currently generating about -0.08 per unit of risk. If you would invest  66,919  in United Rentals on February 26, 2024 and sell it today you would earn a total of  436.00  from holding United Rentals or generate 0.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

United Rentals  vs.  Aeva Technologies

United Rentals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, United Rentals is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Aeva Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeva Technologies 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 June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with United Rentals and Aeva Technologies

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

The idea behind United Rentals and Aeva Technologies 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.