Correlation Between Ryder System and United Rentals

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

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

Diversification Opportunities for Ryder System and United Rentals

0.66

Correlation Coefficient

Ryder System  United Rentals

Poor diversification

The 3 months correlation between Ryder and United is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ryder System and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Ryder System 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 Ryder System 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 Ryder System i.e., Ryder System and United Rentals go up and down completely randomly.

Pair Corralation between Ryder System and United Rentals

Taking into account the 90-day investment horizon Ryder System is expected to generate 0.78 times more return on investment than United Rentals. However, Ryder System is 1.28 times less risky than United Rentals. It trades about -0.07 of its potential returns per unit of risk. United Rentals is currently generating about -0.07 per unit of risk. If you would invest  15,855  in Ryder System on December 27, 2024 and sell it today you would lose (1,395) from holding Ryder System or give up 8.8% of portfolio value over 90 days.

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

Ryder System  vs.  United Rentals

Ryder System

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ryder System has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

United Rentals

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Ryder System and United Rentals

The main advantage of trading using opposite Ryder System and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ryder System 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 Ryder System 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.