Correlation Between United Rentals and CPU SOFTWAREHOUSE

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

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

Diversification Opportunities for United Rentals and CPU SOFTWAREHOUSE

-0.11

Correlation Coefficient

United Rentals  CPU SOFTWAREHOUSE

Good diversification

The 3 months correlation between United and CPU is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and CPU SOFTWAREHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPU SOFTWAREHOUSE has no effect on the direction of United Rentals i.e., United Rentals and CPU SOFTWAREHOUSE go up and down completely randomly.

Pair Corralation between United Rentals and CPU SOFTWAREHOUSE

Considering the 90-day investment horizon United Rentals is expected to generate 0.86 times more return on investment than CPU SOFTWAREHOUSE. However, United Rentals is 1.17 times less risky than CPU SOFTWAREHOUSE. It trades about 0.18 of its potential returns per unit of risk. CPU SOFTWAREHOUSE is currently generating about 0.03 per unit of risk. If you would invest  69,926  in United Rentals on September 4, 2024 and sell it today you would earn a total of  15,779  from holding United Rentals or generate 22.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

United Rentals  vs.  CPU SOFTWAREHOUSE

United Rentals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, United Rentals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CPU SOFTWAREHOUSE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, CPU SOFTWAREHOUSE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with United Rentals and CPU SOFTWAREHOUSE

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

The idea behind United Rentals and CPU SOFTWAREHOUSE 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.