Correlation Between United Rentals and SCOTT TECHNOLOGY

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

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

Diversification Opportunities for United Rentals and SCOTT TECHNOLOGY

0.26

Correlation Coefficient

United Rentals  SCOTT TECHNOLOGY

Modest diversification

The 3 months correlation between United and SCOTT is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and SCOTT TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOTT TECHNOLOGY has no effect on the direction of United Rentals i.e., United Rentals and SCOTT TECHNOLOGY go up and down completely randomly.

Pair Corralation between United Rentals and SCOTT TECHNOLOGY

Assuming the 90 days horizon United Rentals is expected to generate 0.8 times more return on investment than SCOTT TECHNOLOGY. However, United Rentals is 1.25 times less risky than SCOTT TECHNOLOGY. It trades about 0.07 of its potential returns per unit of risk. SCOTT TECHNOLOGY is currently generating about 0.01 per unit of risk. If you would invest  34,821  in United Rentals on September 28, 2024 and sell it today you would earn a total of  35,499  from holding United Rentals or generate 101.95% 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.  SCOTT TECHNOLOGY

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.

SCOTT TECHNOLOGY

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SCOTT TECHNOLOGY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, SCOTT TECHNOLOGY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and SCOTT TECHNOLOGY

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

The idea behind United Rentals and SCOTT TECHNOLOGY 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.