Correlation Between Ultra Clean and UNITED RENTALS

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

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

Diversification Opportunities for Ultra Clean and UNITED RENTALS

-0.22

Correlation Coefficient

Ultra Clean  UNITED RENTALS

Very good diversification

The 3 months correlation between Ultra and UNITED is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and UNITED RENTALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED RENTALS and Ultra Clean 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 Ultra Clean Holdings 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 Ultra Clean i.e., Ultra Clean and UNITED RENTALS go up and down completely randomly.

Pair Corralation between Ultra Clean and UNITED RENTALS

Assuming the 90 days horizon Ultra Clean is expected to generate 1.66 times less return on investment than UNITED RENTALS. In addition to that, Ultra Clean is 1.33 times more volatile than UNITED RENTALS. It trades about 0.03 of its total potential returns per unit of risk. UNITED RENTALS is currently generating about 0.07 per unit of volatility. If you would invest  33,416  in UNITED RENTALS on October 11, 2024 and sell it today you would earn a total of  31,144  from holding UNITED RENTALS or generate 93.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Ultra Clean Holdings  vs.  UNITED RENTALS

Ultra Clean Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultra Clean Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

UNITED RENTALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNITED RENTALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ultra Clean and UNITED RENTALS

The main advantage of trading using opposite Ultra Clean and UNITED RENTALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Clean 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's long position.

The idea behind Ultra Clean Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.