Correlation Between Advanced Medical and United Rentals

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

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

Diversification Opportunities for Advanced Medical and United Rentals

0.37

Correlation Coefficient

Advanced Medical  United Rentals

Weak diversification

The 3 months correlation between Advanced and United is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Advanced Medical 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 Advanced Medical Solutions 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 Advanced Medical i.e., Advanced Medical and United Rentals go up and down completely randomly.

Pair Corralation between Advanced Medical and United Rentals

Assuming the 90 days trading horizon Advanced Medical is expected to generate 6.03 times less return on investment than United Rentals. In addition to that, Advanced Medical is 1.08 times more volatile than United Rentals. It trades about 0.01 of its total potential returns per unit of risk. United Rentals is currently generating about 0.06 per unit of volatility. If you would invest  39,180  in United Rentals on October 23, 2024 and sell it today you would earn a total of  35,940  from holding United Rentals or generate 91.73% return on investment over 90 days.

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

Advanced Medical Solutions  vs.  United Rentals

Advanced Medical Sol

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Medical Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Advanced Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

United Rentals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Advanced Medical and United Rentals

The main advantage of trading using opposite Advanced Medical and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Medical 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 Advanced Medical Solutions 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.