Correlation Between United Rentals and IShares Small

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

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

Diversification Opportunities for United Rentals and IShares Small

0.92

Correlation Coefficient

United Rentals  IShares Small

Almost no diversification

The 3 months correlation between United and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and iShares Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Small Cap 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 IShares Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Small Cap has no effect on the direction of United Rentals i.e., United Rentals and IShares Small go up and down completely randomly.

Pair Corralation between United Rentals and IShares Small

Considering the 90-day investment horizon United Rentals is expected to under-perform the IShares Small. In addition to that, United Rentals is 2.05 times more volatile than iShares Small Cap. It trades about -0.05 of its total potential returns per unit of risk. iShares Small Cap is currently generating about -0.08 per unit of volatility. If you would invest  3,233  in iShares Small Cap on December 28, 2024 and sell it today you would lose (174.00) from holding iShares Small Cap or give up 5.38% of portfolio value over 90 days.

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

United Rentals  vs.  iShares Small Cap

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.

iShares Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, IShares Small is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with United Rentals and IShares Small

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

The idea behind United Rentals and iShares Small Cap 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.