Correlation Between UNITED RENTALS and FEMALE HEALTH

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

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

Diversification Opportunities for UNITED RENTALS and FEMALE HEALTH

-0.26

Correlation Coefficient

UNITED RENTALS  FEMALE HEALTH

Very good diversification

The 3 months correlation between UNITED and FEMALE is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and FEMALE HEALTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEMALE HEALTH 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 FEMALE HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEMALE HEALTH has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and FEMALE HEALTH go up and down completely randomly.

Pair Corralation between UNITED RENTALS and FEMALE HEALTH

Assuming the 90 days trading horizon UNITED RENTALS is expected to generate 0.38 times more return on investment than FEMALE HEALTH. However, UNITED RENTALS is 2.65 times less risky than FEMALE HEALTH. It trades about 0.08 of its potential returns per unit of risk. FEMALE HEALTH is currently generating about -0.04 per unit of risk. If you would invest  32,237  in UNITED RENTALS on September 21, 2024 and sell it today you would earn a total of  37,143  from holding UNITED RENTALS or generate 115.22% return on investment over 90 days.

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

UNITED RENTALS  vs.  FEMALE HEALTH

UNITED RENTALS

Risk-Adjusted Performance

0 of 100

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 rather sound basic indicators, UNITED RENTALS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

FEMALE HEALTH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEMALE HEALTH has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FEMALE HEALTH is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with UNITED RENTALS and FEMALE HEALTH

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

The idea behind UNITED RENTALS and FEMALE HEALTH 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.