Correlation Between United Rentals and Pan American

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

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

Diversification Opportunities for United Rentals and Pan American

0.29

Correlation Coefficient

United Rentals  Pan American

Modest diversification

The 3 months correlation between United and Pan is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver 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 Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of United Rentals i.e., United Rentals and Pan American go up and down completely randomly.

Pair Corralation between United Rentals and Pan American

Assuming the 90 days horizon United Rentals is expected to generate 0.95 times more return on investment than Pan American. However, United Rentals is 1.05 times less risky than Pan American. It trades about 0.07 of its potential returns per unit of risk. Pan American Silver is currently generating about 0.03 per unit of risk. If you would invest  33,436  in United Rentals on October 11, 2024 and sell it today you would earn a total of  32,824  from holding United Rentals or generate 98.17% return on investment over 90 days.

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

United Rentals  vs.  Pan American Silver

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 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.

Pan American Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pan American Silver has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pan American is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with United Rentals and Pan American

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

The idea behind United Rentals and Pan American Silver 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.