Correlation Between United Rentals and United Lithium

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

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

Diversification Opportunities for United Rentals and United Lithium

-0.48

Correlation Coefficient

United Rentals  United Lithium

Very good diversification

The 3 months correlation between United and United is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and United Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Lithium Corp 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 United Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Lithium Corp has no effect on the direction of United Rentals i.e., United Rentals and United Lithium go up and down completely randomly.

Pair Corralation between United Rentals and United Lithium

Considering the 90-day investment horizon United Rentals is expected to generate 1.95 times less return on investment than United Lithium. But when comparing it to its historical volatility, United Rentals is 6.37 times less risky than United Lithium. It trades about 0.11 of its potential returns per unit of risk. United Lithium Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  38.00  in United Lithium Corp on September 4, 2024 and sell it today you would lose (27.00) from holding United Lithium Corp or give up 71.05% of portfolio value over 90 days.

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

United Rentals  vs.  United Lithium Corp

United Rentals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, United Rentals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

United Lithium Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, United Lithium is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with United Rentals and United Lithium

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

The idea behind United Rentals and United Lithium Corp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.