Correlation Between United Rentals and Advanced Micro

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

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

Diversification Opportunities for United Rentals and Advanced Micro

0.76

Correlation Coefficient

United Rentals  Advanced Micro

Poor diversification

The 3 months correlation between United and Advanced is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices 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 Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of United Rentals i.e., United Rentals and Advanced Micro go up and down completely randomly.

Pair Corralation between United Rentals and Advanced Micro

Assuming the 90 days horizon United Rentals is expected to under-perform the Advanced Micro. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 1.06 times less risky than Advanced Micro. The stock trades about -0.07 of its potential returns per unit of risk. The Advanced Micro Devices is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  11,950  in Advanced Micro Devices on December 27, 2024 and sell it today you would lose (1,290) from holding Advanced Micro Devices or give up 10.79% of portfolio value over 90 days.

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

United Rentals  vs.  Advanced Micro Devices

United Rentals

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Advanced Micro Devices

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advanced Micro Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with United Rentals and Advanced Micro

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

The idea behind United Rentals and Advanced Micro Devices 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.