Correlation Between United Rentals and SPDR Barclays

Can any of the company-specific risk be diversified away by investing in both United Rentals and SPDR Barclays 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 Barclays 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 Barclays 10, you can compare the effects of market volatilities on United Rentals and SPDR Barclays 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 Barclays. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and SPDR Barclays.

Diversification Opportunities for United Rentals and SPDR Barclays

0.62

Correlation Coefficient

United Rentals  SPDR Barclays

Poor diversification

The 3 months correlation between United and SPDR is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and SPDR Barclays 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays 10 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 Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays 10 has no effect on the direction of United Rentals i.e., United Rentals and SPDR Barclays go up and down completely randomly.

Pair Corralation between United Rentals and SPDR Barclays

Considering the 90-day investment horizon United Rentals is expected to under-perform the SPDR Barclays. In addition to that, United Rentals is 3.03 times more volatile than SPDR Barclays 10. It trades about -0.05 of its total potential returns per unit of risk. SPDR Barclays 10 is currently generating about -0.1 per unit of volatility. If you would invest  2,556  in SPDR Barclays 10 on December 28, 2024 and sell it today you would lose (127.00) from holding SPDR Barclays 10 or give up 4.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

United Rentals  vs.  SPDR Barclays 10

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 Barclays 10

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Barclays 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, SPDR Barclays is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with United Rentals and SPDR Barclays

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

The idea behind United Rentals and SPDR Barclays 10 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.