Correlation Between United Rentals and Fidelity Covington

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

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

Diversification Opportunities for United Rentals and Fidelity Covington

0.86

Correlation Coefficient

United Rentals  Fidelity Covington

Very poor diversification

The 3 months correlation between United and Fidelity is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust 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 Fidelity Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of United Rentals i.e., United Rentals and Fidelity Covington go up and down completely randomly.

Pair Corralation between United Rentals and Fidelity Covington

Considering the 90-day investment horizon United Rentals is expected to under-perform the Fidelity Covington. In addition to that, United Rentals is 1.41 times more volatile than Fidelity Covington Trust. It trades about -0.06 of its total potential returns per unit of risk. Fidelity Covington Trust is currently generating about -0.08 per unit of volatility. If you would invest  2,600  in Fidelity Covington Trust on December 26, 2024 and sell it today you would lose (228.00) from holding Fidelity Covington Trust or give up 8.77% of portfolio value over 90 days.

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

United Rentals  vs.  Fidelity Covington Trust

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.

Fidelity Covington Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Covington Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with United Rentals and Fidelity Covington

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

The idea behind United Rentals and Fidelity Covington Trust 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.