Correlation Between McGrath RentCorp and Stratasys

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

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

Diversification Opportunities for McGrath RentCorp and Stratasys

0.6

Correlation Coefficient

McGrath RentCorp  Stratasys

Poor diversification

The 3 months correlation between McGrath and Stratasys is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding McGrath RentCorp and Stratasys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stratasys 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 Stratasys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stratasys has no effect on the direction of McGrath RentCorp i.e., McGrath RentCorp and Stratasys go up and down completely randomly.

Pair Corralation between McGrath RentCorp and Stratasys

Given the investment horizon of 90 days McGrath RentCorp is expected to generate 0.41 times more return on investment than Stratasys. However, McGrath RentCorp is 2.44 times less risky than Stratasys. It trades about -0.3 of its potential returns per unit of risk. Stratasys is currently generating about -0.23 per unit of risk. If you would invest  11,981  in McGrath RentCorp on October 12, 2024 and sell it today you would lose (815.00) from holding McGrath RentCorp or give up 6.8% 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.  Stratasys

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.

Stratasys

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stratasys are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Stratasys unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with McGrath RentCorp and Stratasys

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

The idea behind McGrath RentCorp and Stratasys 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.