Correlation Between United Rentals and Nicholas Financial

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

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

Diversification Opportunities for United Rentals and Nicholas Financial

-0.46

Correlation Coefficient

United Rentals  Nicholas Financial

Very good diversification

The 3 months correlation between United and Nicholas is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Nicholas Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nicholas Financial 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 Nicholas Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nicholas Financial has no effect on the direction of United Rentals i.e., United Rentals and Nicholas Financial go up and down completely randomly.

Pair Corralation between United Rentals and Nicholas Financial

Considering the 90-day investment horizon United Rentals is expected to generate 0.97 times more return on investment than Nicholas Financial. However, United Rentals is 1.03 times less risky than Nicholas Financial. It trades about 0.11 of its potential returns per unit of risk. Nicholas Financial is currently generating about -0.01 per unit of risk. If you would invest  50,059  in United Rentals on September 4, 2024 and sell it today you would earn a total of  36,843  from holding United Rentals or generate 73.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	81.38%
Values	Daily Returns

United Rentals  vs.  Nicholas Financial

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.

Nicholas Financial

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Nicholas Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite unfluctuating fundamental indicators, Nicholas Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and Nicholas Financial

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

The idea behind United Rentals and Nicholas Financial 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.