Correlation Between United Rentals and Occidental Petroleum

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

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

Diversification Opportunities for United Rentals and Occidental Petroleum

0.22

Correlation Coefficient

United Rentals  Occidental Petroleum

Modest diversification

The 3 months correlation between United and Occidental is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Occidental Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum 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 Occidental Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of United Rentals i.e., United Rentals and Occidental Petroleum go up and down completely randomly.

Pair Corralation between United Rentals and Occidental Petroleum

Considering the 90-day investment horizon United Rentals is expected to generate 1.11 times more return on investment than Occidental Petroleum. However, United Rentals is 1.11 times more volatile than Occidental Petroleum. It trades about 0.1 of its potential returns per unit of risk. Occidental Petroleum is currently generating about 0.01 per unit of risk. If you would invest  71,129  in United Rentals on September 12, 2024 and sell it today you would earn a total of  8,568  from holding United Rentals or generate 12.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

United Rentals  vs.  Occidental Petroleum

United Rentals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, United Rentals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Occidental Petroleum

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Occidental Petroleum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with United Rentals and Occidental Petroleum

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

The idea behind United Rentals and Occidental Petroleum 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.