Correlation Between McGrath RentCorp and GATX

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

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

Diversification Opportunities for McGrath RentCorp and GATX

0.83

Correlation Coefficient

McGrath RentCorp  GATX

Very poor diversification

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

Pair Corralation between McGrath RentCorp and GATX

Given the investment horizon of 90 days McGrath RentCorp is expected to generate 1.12 times more return on investment than GATX. However, McGrath RentCorp is 1.12 times more volatile than GATX Corporation. It trades about 0.03 of its potential returns per unit of risk. GATX Corporation is currently generating about 0.02 per unit of risk. 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

McGrath RentCorp  vs.  GATX Corp.

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.

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.

Pair Trading with McGrath RentCorp and GATX

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

The idea behind McGrath RentCorp and GATX Corporation 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.