Correlation Between United Rentals and Entree Resources

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

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

Diversification Opportunities for United Rentals and Entree Resources

0.61

Correlation Coefficient

United Rentals  Entree Resources

Poor diversification

The 3 months correlation between United and Entree is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Entree Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entree Resources 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 Entree Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entree Resources has no effect on the direction of United Rentals i.e., United Rentals and Entree Resources go up and down completely randomly.

Pair Corralation between United Rentals and Entree Resources

Considering the 90-day investment horizon United Rentals is expected to under-perform the Entree Resources. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 1.25 times less risky than Entree Resources. The stock trades about -0.06 of its potential returns per unit of risk. The Entree Resources is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  244.00  in Entree Resources on December 26, 2024 and sell it today you would lose (23.00) from holding Entree Resources or give up 9.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

United Rentals  vs.  Entree Resources

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 latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Entree Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Entree Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with United Rentals and Entree Resources

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

The idea behind United Rentals and Entree Resources 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.