Correlation Between United Rentals and Top Glove

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

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

Diversification Opportunities for United Rentals and Top Glove

0.25

Correlation Coefficient

United Rentals  Top Glove

Modest diversification

The 3 months correlation between United and Top is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Top Glove in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Glove 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 Top Glove. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Glove has no effect on the direction of United Rentals i.e., United Rentals and Top Glove go up and down completely randomly.

Pair Corralation between United Rentals and Top Glove

Considering the 90-day investment horizon United Rentals is expected to under-perform the Top Glove. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 1.56 times less risky than Top Glove. The stock trades about -0.22 of its potential returns per unit of risk. The Top Glove is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  115.00  in Top Glove on December 2, 2024 and sell it today you would lose (24.00) from holding Top Glove or give up 20.87% of portfolio value over 90 days.

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

United Rentals  vs.  Top Glove

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 uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Top Glove

Risk-Adjusted Performance

Very Weak

Over the last 90 days Top Glove has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with United Rentals and Top Glove

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

The idea behind United Rentals and Top Glove 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.