Correlation Between McGrath RentCorp and InfuSystems Holdings

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

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

Diversification Opportunities for McGrath RentCorp and InfuSystems Holdings

0.65

Correlation Coefficient

McGrath RentCorp  InfuSystems Holdings

Poor diversification

The 3 months correlation between McGrath and InfuSystems is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding McGrath RentCorp and InfuSystems Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InfuSystems Holdings 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 InfuSystems Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InfuSystems Holdings has no effect on the direction of McGrath RentCorp i.e., McGrath RentCorp and InfuSystems Holdings go up and down completely randomly.

Pair Corralation between McGrath RentCorp and InfuSystems Holdings

Given the investment horizon of 90 days McGrath RentCorp is expected to generate 0.37 times more return on investment than InfuSystems Holdings. However, McGrath RentCorp is 2.74 times less risky than InfuSystems Holdings. It trades about -0.19 of its potential returns per unit of risk. InfuSystems Holdings is currently generating about -0.1 per unit of risk. If you would invest  12,162  in McGrath RentCorp on October 11, 2024 and sell it today you would lose (996.00) from holding McGrath RentCorp or give up 8.19% of portfolio value over 90 days.

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

McGrath RentCorp  vs.  InfuSystems Holdings

McGrath RentCorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in McGrath RentCorp are ranked lower than 3 (%) 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.

InfuSystems Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in InfuSystems Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, InfuSystems Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with McGrath RentCorp and InfuSystems Holdings

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

The idea behind McGrath RentCorp and InfuSystems Holdings 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.