Correlation Between United Rentals and Jpmorgan Hedged

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

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

Diversification Opportunities for United Rentals and Jpmorgan Hedged

0.79

Correlation Coefficient

United Rentals  Jpmorgan Hedged

Poor diversification

The 3 months correlation between United and Jpmorgan is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Jpmorgan Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Hedged Equity 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 Jpmorgan Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Hedged Equity has no effect on the direction of United Rentals i.e., United Rentals and Jpmorgan Hedged go up and down completely randomly.

Pair Corralation between United Rentals and Jpmorgan Hedged

Considering the 90-day investment horizon United Rentals is expected to under-perform the Jpmorgan Hedged. In addition to that, United Rentals is 3.49 times more volatile than Jpmorgan Hedged Equity. It trades about -0.05 of its total potential returns per unit of risk. Jpmorgan Hedged Equity is currently generating about -0.13 per unit of volatility. If you would invest  3,331  in Jpmorgan Hedged Equity on December 29, 2024 and sell it today you would lose (179.00) from holding Jpmorgan Hedged Equity or give up 5.37% of portfolio value over 90 days.

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

United Rentals  vs.  Jpmorgan Hedged Equity

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.

Jpmorgan Hedged Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jpmorgan Hedged Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Jpmorgan Hedged is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Rentals and Jpmorgan Hedged

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

The idea behind United Rentals and Jpmorgan Hedged Equity 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.