Correlation Between United Rentals and BW OFFSHORE

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

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

Diversification Opportunities for United Rentals and BW OFFSHORE

0.06

Correlation Coefficient

United Rentals  BW OFFSHORE

Significant diversification

The 3 months correlation between United and XY81 is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and BW OFFSHORE LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW OFFSHORE LTD 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 BW OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW OFFSHORE LTD has no effect on the direction of United Rentals i.e., United Rentals and BW OFFSHORE go up and down completely randomly.

Pair Corralation between United Rentals and BW OFFSHORE

Assuming the 90 days horizon United Rentals is expected to under-perform the BW OFFSHORE. In addition to that, United Rentals is 1.13 times more volatile than BW OFFSHORE LTD. It trades about -0.07 of its total potential returns per unit of risk. BW OFFSHORE LTD is currently generating about 0.09 per unit of volatility. If you would invest  233.00  in BW OFFSHORE LTD on December 30, 2024 and sell it today you would earn a total of  27.00  from holding BW OFFSHORE LTD or generate 11.59% return on investment over 90 days.

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

United Rentals  vs.  BW OFFSHORE LTD

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.

BW OFFSHORE LTD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BW OFFSHORE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with United Rentals and BW OFFSHORE

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

The idea behind United Rentals and BW OFFSHORE LTD 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.