Correlation Between United Rentals and SIR Royalty

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

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

Diversification Opportunities for United Rentals and SIR Royalty

-0.23

Correlation Coefficient

United Rentals  SIR Royalty

Very good diversification

The 3 months correlation between United and SIR is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and SIR Royalty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIR Royalty Income 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 SIR Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIR Royalty Income has no effect on the direction of United Rentals i.e., United Rentals and SIR Royalty go up and down completely randomly.

Pair Corralation between United Rentals and SIR Royalty

Considering the 90-day investment horizon United Rentals is expected to under-perform the SIR Royalty. In addition to that, United Rentals is 1.32 times more volatile than SIR Royalty Income. It trades about -0.23 of its total potential returns per unit of risk. SIR Royalty Income is currently generating about 0.03 per unit of volatility. If you would invest  1,247  in SIR Royalty Income on December 1, 2024 and sell it today you would earn a total of  31.00  from holding SIR Royalty Income or generate 2.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

United Rentals  vs.  SIR Royalty Income

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 uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

SIR Royalty Income

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SIR Royalty Income are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SIR Royalty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Rentals and SIR Royalty

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

The idea behind United Rentals and SIR Royalty Income 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.