Correlation Between GATX and McGrath RentCorp

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

By analyzing existing cross correlation between GATX Corporation and McGrath RentCorp, you can compare the effects of market volatilities on GATX and McGrath RentCorp 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 GATX with a short position of McGrath RentCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GATX and McGrath RentCorp.

Diversification Opportunities for GATX and McGrath RentCorp

0.83

Correlation Coefficient

GATX  McGrath RentCorp

Very poor diversification

The 3 months correlation between GATX and McGrath is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding GATX Corp. and McGrath RentCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McGrath RentCorp and GATX 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 GATX Corporation are associated (or correlated) with McGrath RentCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McGrath RentCorp has no effect on the direction of GATX i.e., GATX and McGrath RentCorp go up and down completely randomly.

Pair Corralation between GATX and McGrath RentCorp

Given the investment horizon of 90 days GATX is expected to generate 2.18 times less return on investment than McGrath RentCorp. But when comparing it to its historical volatility, GATX Corporation is 1.12 times less risky than McGrath RentCorp. It trades about 0.02 of its potential returns per unit of risk. McGrath RentCorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  11,066  in McGrath RentCorp on December 28, 2024 and sell it today you would earn a total of  286.00  from holding McGrath RentCorp or generate 2.58% return on investment over 90 days.

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

GATX Corp.  vs.  McGrath RentCorp

GATX

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GATX Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, GATX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

McGrath RentCorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in McGrath RentCorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, McGrath RentCorp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GATX and McGrath RentCorp

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

The idea behind GATX Corporation and McGrath RentCorp 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.