Correlation Between United Rentals and EatonPLC
Can any of the company-specific risk be diversified away by investing in both United Rentals and EatonPLC 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 EatonPLC 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 EatonPLC 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 EatonPLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and EatonPLC.
Diversification Opportunities for United Rentals and EatonPLC
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between United and EatonPLC 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 EatonPLC. 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 EatonPLC go up and down completely randomly.
Pair Corralation between United Rentals and EatonPLC
Considering the 90-day investment horizon United Rentals is expected to generate 1.26 times more return on investment than EatonPLC. However, United Rentals is 1.26 times more volatile than Eaton PLC. It trades about 0.09 of its potential returns per unit of risk. Eaton PLC is currently generating about 0.11 per unit of risk. If you would invest 34,544 in United Rentals on September 6, 2024 and sell it today you would earn a total of 50,955 from holding United Rentals or generate 147.51% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.02% |
Values | Daily Returns |
United Rentals vs. Eaton PLC
Performance |
Timeline |
United Rentals |
Eaton PLC |
United Rentals and EatonPLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United Rentals and EatonPLC
The main advantage of trading using opposite United Rentals and EatonPLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, EatonPLC 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 EatonPLC will offset losses from the drop in EatonPLC'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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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