Correlation Between United Rentals and SPDR SPASX

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

By analyzing existing cross correlation between United Rentals and SPDR SPASX 200, you can compare the effects of market volatilities on United Rentals and SPDR SPASX 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 SPDR SPASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and SPDR SPASX.

Diversification Opportunities for United Rentals and SPDR SPASX

0.42

Correlation Coefficient

United Rentals  SPDR SPASX

Very weak diversification

The 3 months correlation between United and SPDR is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and SPDR SPASX 200 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SPASX 200 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 SPDR SPASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SPASX 200 has no effect on the direction of United Rentals i.e., United Rentals and SPDR SPASX go up and down completely randomly.

Pair Corralation between United Rentals and SPDR SPASX

Considering the 90-day investment horizon United Rentals is expected to under-perform the SPDR SPASX. In addition to that, United Rentals is 1.99 times more volatile than SPDR SPASX 200. It trades about -0.05 of its total potential returns per unit of risk. SPDR SPASX 200 is currently generating about 0.04 per unit of volatility. If you would invest  1,165  in SPDR SPASX 200 on December 28, 2024 and sell it today you would earn a total of  31.00  from holding SPDR SPASX 200 or generate 2.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

United Rentals  vs.  SPDR SPASX 200

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.

SPDR SPASX 200

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SPASX 200 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SPASX is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United Rentals and SPDR SPASX

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

The idea behind United Rentals and SPDR SPASX 200 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.