Correlation Between United Rentals and PG +

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

By analyzing existing cross correlation between United Rentals and PG E P6, you can compare the effects of market volatilities on United Rentals and PG + 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 PG +. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and PG +.

Diversification Opportunities for United Rentals and PG +

0.54

Correlation Coefficient

United Rentals  PG +

Very weak diversification

The 3 months correlation between United and PCG6 is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and PG E P6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PG E P6 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 PG +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PG E P6 has no effect on the direction of United Rentals i.e., United Rentals and PG + go up and down completely randomly.

Pair Corralation between United Rentals and PG +

Assuming the 90 days horizon United Rentals is expected to generate 1.45 times more return on investment than PG +. However, United Rentals is 1.45 times more volatile than PG E P6. It trades about 0.06 of its potential returns per unit of risk. PG E P6 is currently generating about 0.03 per unit of risk. If you would invest  49,479  in United Rentals on October 6, 2024 and sell it today you would earn a total of  17,721  from holding United Rentals or generate 35.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

United Rentals  vs.  PG E P6

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.

PG E P6

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PG E P6 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, PG + 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 PG +

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

The idea behind United Rentals and PG E P6 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.