Correlation Between United Rentals and Fair Isaac

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

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

Diversification Opportunities for United Rentals and Fair Isaac

0.63

Correlation Coefficient

United Rentals  Fair Isaac

Poor diversification

The 3 months correlation between United and Fair is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Fair Isaac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac 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 Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac has no effect on the direction of United Rentals i.e., United Rentals and Fair Isaac go up and down completely randomly.

Pair Corralation between United Rentals and Fair Isaac

Assuming the 90 days trading horizon United Rentals is expected to generate 3.83 times more return on investment than Fair Isaac. However, United Rentals is 3.83 times more volatile than Fair Isaac. It trades about 0.08 of its potential returns per unit of risk. Fair Isaac is currently generating about -0.42 per unit of risk. If you would invest  15,888  in United Rentals on October 23, 2024 and sell it today you would earn a total of  822.00  from holding United Rentals or generate 5.17% return on investment over 90 days.

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

United Rentals  vs.  Fair Isaac

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.

Fair Isaac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fair Isaac has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Fair Isaac is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Rentals and Fair Isaac

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

The idea behind United Rentals and Fair Isaac 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.