Correlation Between PENN Entertainment, and United Rentals

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

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

Diversification Opportunities for PENN Entertainment, and United Rentals

0.04

Correlation Coefficient

PENN Entertainment,  United Rentals

Significant diversification

The 3 months correlation between PENN and United is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding PENN Entertainment, and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and PENN Entertainment, 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 PENN Entertainment, 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 PENN Entertainment, i.e., PENN Entertainment, and United Rentals go up and down completely randomly.

Pair Corralation between PENN Entertainment, and United Rentals

Assuming the 90 days trading horizon PENN Entertainment, is expected to under-perform the United Rentals. But the stock apears to be less risky and, when comparing its historical volatility, PENN Entertainment, is 1.03 times less risky than United Rentals. The stock trades about -0.02 of its potential returns per unit of risk. The United Rentals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7,759  in United Rentals on October 20, 2024 and sell it today you would earn a total of  8,977  from holding United Rentals or generate 115.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

PENN Entertainment,  vs.  United Rentals

PENN Entertainment,

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PENN Entertainment, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, PENN Entertainment, sustained solid returns over the last few months and may actually be approaching a breakup point.

United Rentals

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with PENN Entertainment, and United Rentals

The main advantage of trading using opposite PENN Entertainment, and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PENN Entertainment, 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 PENN Entertainment, 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.