Correlation Between UNITED RENTALS and Plexus Corp

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

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

Diversification Opportunities for UNITED RENTALS and Plexus Corp

-0.06

Correlation Coefficient

UNITED RENTALS  Plexus Corp

Good diversification

The 3 months correlation between UNITED and Plexus is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and Plexus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plexus Corp 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 Plexus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plexus Corp has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and Plexus Corp go up and down completely randomly.

Pair Corralation between UNITED RENTALS and Plexus Corp

Assuming the 90 days trading horizon UNITED RENTALS is expected to generate 1.32 times more return on investment than Plexus Corp. However, UNITED RENTALS is 1.32 times more volatile than Plexus Corp. It trades about 0.23 of its potential returns per unit of risk. Plexus Corp is currently generating about 0.23 per unit of risk. If you would invest  69,080  in UNITED RENTALS on October 22, 2024 and sell it today you would earn a total of  5,260  from holding UNITED RENTALS or generate 7.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

UNITED RENTALS  vs.  Plexus Corp

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

Plexus Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plexus Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Plexus Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNITED RENTALS and Plexus Corp

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

The idea behind UNITED RENTALS and Plexus Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.