Correlation Between United Rentals and DriveItAway

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

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

Diversification Opportunities for United Rentals and DriveItAway

-0.56

Correlation Coefficient

United Rentals  DriveItAway

Excellent diversification

The 3 months correlation between United and DriveItAway is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and DriveItAway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DriveItAway 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 DriveItAway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DriveItAway has no effect on the direction of United Rentals i.e., United Rentals and DriveItAway go up and down completely randomly.

Pair Corralation between United Rentals and DriveItAway

Considering the 90-day investment horizon United Rentals is expected to generate 0.13 times more return on investment than DriveItAway. However, United Rentals is 7.41 times less risky than DriveItAway. It trades about 0.05 of its potential returns per unit of risk. DriveItAway is currently generating about -0.05 per unit of risk. If you would invest  74,057  in United Rentals on September 16, 2024 and sell it today you would earn a total of  3,825  from holding United Rentals or generate 5.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

United Rentals  vs.  DriveItAway

United Rentals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, United Rentals is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

DriveItAway

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DriveItAway has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with United Rentals and DriveItAway

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

The idea behind United Rentals and DriveItAway 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.