Correlation Between United Rentals and Eaton PLC
Can any of the company-specific risk be diversified away by investing in both United Rentals and Eaton PLC 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 Eaton PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Eaton PLC, you can compare the effects of market volatilities on United Rentals and Eaton PLC 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 Eaton PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Eaton PLC.
Diversification Opportunities for United Rentals and Eaton PLC
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between United and Eaton is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC 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 Eaton PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton PLC has no effect on the direction of United Rentals i.e., United Rentals and Eaton PLC go up and down completely randomly.
Pair Corralation between United Rentals and Eaton PLC
Considering the 90-day investment horizon United Rentals is expected to under-perform the Eaton PLC. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 1.37 times less risky than Eaton PLC. The stock trades about -0.09 of its potential returns per unit of risk. The Eaton PLC is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 32,050 in Eaton PLC on September 7, 2024 and sell it today you would earn a total of 3,750 from holding Eaton PLC or generate 11.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
United Rentals vs. Eaton PLC
Performance |
Timeline |
United Rentals |
Eaton PLC |
United Rentals and Eaton PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United Rentals and Eaton PLC
The main advantage of trading using opposite United Rentals and Eaton PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Eaton PLC 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 Eaton PLC will offset losses from the drop in Eaton PLC's long position.United Rentals vs. HE Equipment Services | United Rentals vs. GATX Corporation | United Rentals vs. McGrath RentCorp | United Rentals vs. Alta Equipment Group |
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Check out your portfolio center.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.
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