Correlation Between Superior Plus and United Rentals

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

By analyzing existing cross correlation between Superior Plus Corp and United Rentals, you can compare the effects of market volatilities on Superior Plus 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 Superior Plus with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and United Rentals.

Diversification Opportunities for Superior Plus and United Rentals

-0.73

Correlation Coefficient

Superior Plus  United Rentals

Pay attention - limited upside

The 3 months correlation between Superior and United is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Superior Plus 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 Superior Plus 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 Superior Plus i.e., Superior Plus and United Rentals go up and down completely randomly.

Pair Corralation between Superior Plus and United Rentals

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the United Rentals. In addition to that, Superior Plus is 1.27 times more volatile than United Rentals. It trades about -0.04 of its total potential returns per unit of risk. United Rentals is currently generating about 0.13 per unit of volatility. If you would invest  66,447  in United Rentals on September 2, 2024 and sell it today you would earn a total of  14,293  from holding United Rentals or generate 21.51% return on investment over 90 days.

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

Superior Plus Corp  vs.  United Rentals

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

United Rentals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Rentals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Superior Plus and United Rentals

The main advantage of trading using opposite Superior Plus and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus 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.

The idea behind Superior Plus 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.