Correlation Between United Rentals and Fortress Transportation

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

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

Diversification Opportunities for United Rentals and Fortress Transportation

0.7

Correlation Coefficient

United Rentals  Fortress Transportation

Poor diversification

The 3 months correlation between United and Fortress is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Fortress Transportation and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Transportation 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 Fortress Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortress Transportation has no effect on the direction of United Rentals i.e., United Rentals and Fortress Transportation go up and down completely randomly.

Pair Corralation between United Rentals and Fortress Transportation

Considering the 90-day investment horizon United Rentals is expected to generate 3.21 times more return on investment than Fortress Transportation. However, United Rentals is 3.21 times more volatile than Fortress Transportation and. It trades about 0.11 of its potential returns per unit of risk. Fortress Transportation and is currently generating about 0.02 per unit of risk. If you would invest  78,804  in United Rentals on September 4, 2024 and sell it today you would earn a total of  6,901  from holding United Rentals or generate 8.76% return on investment over 90 days.

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

United Rentals  vs.  Fortress Transportation and

United Rentals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 13 (%) 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.

Fortress Transportation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Transportation and are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Fortress Transportation is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with United Rentals and Fortress Transportation

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

The idea behind United Rentals and Fortress Transportation and 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.