Correlation Between UNITED RENTALS and THRACE PLASTICS

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

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

Diversification Opportunities for UNITED RENTALS and THRACE PLASTICS

0.09

Correlation Coefficient

UNITED RENTALS  THRACE PLASTICS

Significant diversification

The 3 months correlation between UNITED and THRACE is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and THRACE PLASTICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THRACE PLASTICS 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 THRACE PLASTICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THRACE PLASTICS has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and THRACE PLASTICS go up and down completely randomly.

Pair Corralation between UNITED RENTALS and THRACE PLASTICS

Assuming the 90 days trading horizon UNITED RENTALS is expected to under-perform the THRACE PLASTICS. In addition to that, UNITED RENTALS is 1.27 times more volatile than THRACE PLASTICS. It trades about -0.34 of its total potential returns per unit of risk. THRACE PLASTICS is currently generating about 0.11 per unit of volatility. If you would invest  380.00  in THRACE PLASTICS on October 11, 2024 and sell it today you would earn a total of  19.00  from holding THRACE PLASTICS or generate 5.0% return on investment over 90 days.

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

UNITED RENTALS  vs.  THRACE PLASTICS

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.

THRACE PLASTICS

Risk-Adjusted Performance

14 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in THRACE PLASTICS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, THRACE PLASTICS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNITED RENTALS and THRACE PLASTICS

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

The idea behind UNITED RENTALS and THRACE PLASTICS 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.