Correlation Between United Rentals and Skyworks Solutions

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

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

Diversification Opportunities for United Rentals and Skyworks Solutions

0.73

Correlation Coefficient

United Rentals  Skyworks Solutions

Poor diversification

The 3 months correlation between United and Skyworks is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Skyworks Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyworks Solutions 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 Skyworks Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyworks Solutions has no effect on the direction of United Rentals i.e., United Rentals and Skyworks Solutions go up and down completely randomly.

Pair Corralation between United Rentals and Skyworks Solutions

Assuming the 90 days trading horizon United Rentals is expected to generate 0.6 times more return on investment than Skyworks Solutions. However, United Rentals is 1.67 times less risky than Skyworks Solutions. It trades about -0.13 of its potential returns per unit of risk. Skyworks Solutions is currently generating about -0.11 per unit of risk. If you would invest  15,606  in United Rentals on December 30, 2024 and sell it today you would lose (2,708) from holding United Rentals or give up 17.35% of portfolio value over 90 days.

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

United Rentals  vs.  Skyworks Solutions

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Skyworks Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Skyworks Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with United Rentals and Skyworks Solutions

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

The idea behind United Rentals and Skyworks Solutions 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.