Correlation Between United Rentals and Voya Midcap

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

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

Diversification Opportunities for United Rentals and Voya Midcap

0.85

Correlation Coefficient

United Rentals  Voya Midcap

Very poor diversification

The 3 months correlation between United and Voya is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Voya Midcap Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Midcap Opportunities 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 Voya Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Midcap Opportunities has no effect on the direction of United Rentals i.e., United Rentals and Voya Midcap go up and down completely randomly.

Pair Corralation between United Rentals and Voya Midcap

Considering the 90-day investment horizon United Rentals is expected to generate 2.0 times more return on investment than Voya Midcap. However, United Rentals is 2.0 times more volatile than Voya Midcap Opportunities. It trades about 0.19 of its potential returns per unit of risk. Voya Midcap Opportunities is currently generating about 0.33 per unit of risk. If you would invest  69,621  in United Rentals on September 5, 2024 and sell it today you would earn a total of  17,281  from holding United Rentals or generate 24.82% return on investment over 90 days.

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

United Rentals  vs.  Voya Midcap Opportunities

United Rentals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 15 (%) 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.

Voya Midcap Opportunities

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Midcap Opportunities are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Voya Midcap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and Voya Midcap

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

The idea behind United Rentals and Voya Midcap Opportunities 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.