Correlation Between United Rentals and BlackRock

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

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

Diversification Opportunities for United Rentals and BlackRock

0.65

Correlation Coefficient

United Rentals  BlackRock

Poor diversification

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

Pair Corralation between United Rentals and BlackRock

Assuming the 90 days trading horizon United Rentals is expected to generate 1.14 times less return on investment than BlackRock. In addition to that, United Rentals is 2.2 times more volatile than BlackRock. It trades about 0.1 of its total potential returns per unit of risk. BlackRock is currently generating about 0.25 per unit of volatility. If you would invest  7,774  in BlackRock on September 27, 2024 and sell it today you would earn a total of  2,054  from holding BlackRock or generate 26.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

United Rentals  vs.  BlackRock

United Rentals

Risk-Adjusted Performance

7 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, United Rentals sustained solid returns over the last few months and may actually be approaching a breakup point.

BlackRock

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BlackRock sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and BlackRock

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

The idea behind United Rentals and BlackRock 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.