Correlation Between United Rentals and Perkins Small

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Can any of the company-specific risk be diversified away by investing in both United Rentals and Perkins Small 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 Perkins Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Perkins Small Cap, you can compare the effects of market volatilities on United Rentals and Perkins Small 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 Perkins Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Perkins Small.

Diversification Opportunities for United Rentals and Perkins Small

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between United and Perkins is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Perkins Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perkins Small Cap 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 Perkins Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perkins Small Cap has no effect on the direction of United Rentals i.e., United Rentals and Perkins Small go up and down completely randomly.

Pair Corralation between United Rentals and Perkins Small

Considering the 90-day investment horizon United Rentals is expected to generate 1.52 times more return on investment than Perkins Small. However, United Rentals is 1.52 times more volatile than Perkins Small Cap. It trades about 0.15 of its potential returns per unit of risk. Perkins Small Cap is currently generating about 0.12 per unit of risk. If you would invest  70,503  in United Rentals on September 11, 2024 and sell it today you would earn a total of  13,086  from holding United Rentals or generate 18.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

United Rentals  vs.  Perkins Small Cap

 Performance 
       Timeline  
United Rentals 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 11 (%) 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.
Perkins Small Cap 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Perkins Small Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Perkins Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

United Rentals and Perkins Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Rentals and Perkins Small

The main advantage of trading using opposite United Rentals and Perkins Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Perkins Small 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 Perkins Small will offset losses from the drop in Perkins Small's long position.
The idea behind United Rentals and Perkins Small Cap 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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