Correlation Between United Rentals and SENECA FOODS

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

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

Diversification Opportunities for United Rentals and SENECA FOODS

0.26

Correlation Coefficient

United Rentals  SENECA FOODS

Modest diversification

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

Pair Corralation between United Rentals and SENECA FOODS

Assuming the 90 days horizon United Rentals is expected to generate 0.82 times more return on investment than SENECA FOODS. However, United Rentals is 1.21 times less risky than SENECA FOODS. It trades about 0.07 of its potential returns per unit of risk. SENECA FOODS A is currently generating about 0.03 per unit of risk. If you would invest  32,719  in United Rentals on September 25, 2024 and sell it today you would earn a total of  37,601  from holding United Rentals or generate 114.92% 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.  SENECA FOODS A

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.

SENECA FOODS A

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, SENECA FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and SENECA FOODS

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

The idea behind United Rentals and SENECA FOODS A 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.