Correlation Between United Rentals and Blackline

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

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

Diversification Opportunities for United Rentals and Blackline

0.46

Correlation Coefficient

United Rentals  Blackline

Very weak diversification

The 3 months correlation between United and Blackline is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Blackline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackline 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 Blackline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackline has no effect on the direction of United Rentals i.e., United Rentals and Blackline go up and down completely randomly.

Pair Corralation between United Rentals and Blackline

Assuming the 90 days horizon United Rentals is expected to under-perform the Blackline. In addition to that, United Rentals is 1.15 times more volatile than Blackline. It trades about -0.54 of its total potential returns per unit of risk. Blackline is currently generating about 0.01 per unit of volatility. If you would invest  5,850  in Blackline on September 29, 2024 and sell it today you would earn a total of  0.00  from holding Blackline or generate 0.0% return on investment over 90 days.

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

United Rentals  vs.  Blackline

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. Despite nearly stable basic indicators, United Rentals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Blackline

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackline are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Blackline reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and Blackline

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

The idea behind United Rentals and Blackline 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.