Correlation Between UNITED RENTALS and Allstate

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

By analyzing existing cross correlation between UNITED RENTALS and The Allstate, you can compare the effects of market volatilities on UNITED RENTALS and Allstate 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 Allstate. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED RENTALS and Allstate.

Diversification Opportunities for UNITED RENTALS and Allstate

0.83

Correlation Coefficient

UNITED RENTALS  Allstate

Very poor diversification

The 3 months correlation between UNITED and Allstate is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate 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 Allstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allstate has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and Allstate go up and down completely randomly.

Pair Corralation between UNITED RENTALS and Allstate

Assuming the 90 days trading horizon UNITED RENTALS is expected to generate 1.23 times more return on investment than Allstate. However, UNITED RENTALS is 1.23 times more volatile than The Allstate. It trades about 0.14 of its potential returns per unit of risk. The Allstate is currently generating about 0.11 per unit of risk. If you would invest  63,752  in UNITED RENTALS on September 13, 2024 and sell it today you would earn a total of  11,408  from holding UNITED RENTALS or generate 17.89% return on investment over 90 days.

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

UNITED RENTALS  vs.  The Allstate

UNITED RENTALS

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UNITED RENTALS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, UNITED RENTALS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Allstate

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Allstate may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with UNITED RENTALS and Allstate

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

The idea behind UNITED RENTALS and The Allstate 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.