Correlation Between United Rentals and Putnam Multicap

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

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

Diversification Opportunities for United Rentals and Putnam Multicap

0.88

Correlation Coefficient

United Rentals  Putnam Multicap

Very poor diversification

The 3 months correlation between United and Putnam is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Putnam Multicap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Multicap Core 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 Putnam Multicap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Multicap Core has no effect on the direction of United Rentals i.e., United Rentals and Putnam Multicap go up and down completely randomly.

Pair Corralation between United Rentals and Putnam Multicap

Considering the 90-day investment horizon United Rentals is expected to generate 2.92 times more return on investment than Putnam Multicap. However, United Rentals is 2.92 times more volatile than Putnam Multicap Core. It trades about 0.08 of its potential returns per unit of risk. Putnam Multicap Core is currently generating about 0.12 per unit of risk. If you would invest  45,170  in United Rentals on September 12, 2024 and sell it today you would earn a total of  34,432  from holding United Rentals or generate 76.23% return on investment over 90 days.

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

United Rentals  vs.  Putnam Multicap Core

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.

Putnam Multicap Core

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Multicap Core are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Putnam Multicap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United Rentals and Putnam Multicap

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

The idea behind United Rentals and Putnam Multicap Core 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.