Correlation Between United Rentals and VARNO

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

By analyzing existing cross correlation between United Rentals and VARNO 75 15 JAN 28, you can compare the effects of market volatilities on United Rentals and VARNO 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 VARNO. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and VARNO.

Diversification Opportunities for United Rentals and VARNO

0.29

Correlation Coefficient

United Rentals  VARNO

Modest diversification

The 3 months correlation between United and VARNO is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and VARNO 75 15 JAN 28 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VARNO 75 15 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 VARNO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VARNO 75 15 has no effect on the direction of United Rentals i.e., United Rentals and VARNO go up and down completely randomly.

Pair Corralation between United Rentals and VARNO

Considering the 90-day investment horizon United Rentals is expected to under-perform the VARNO. In addition to that, United Rentals is 3.05 times more volatile than VARNO 75 15 JAN 28. It trades about -0.07 of its total potential returns per unit of risk. VARNO 75 15 JAN 28 is currently generating about -0.16 per unit of volatility. If you would invest  10,566  in VARNO 75 15 JAN 28 on December 2, 2024 and sell it today you would lose (290.00) from holding VARNO 75 15 JAN 28 or give up 2.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	62.5%
Values	Daily Returns

United Rentals  vs.  VARNO 75 15 JAN 28

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.

VARNO 75 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days VARNO 75 15 JAN 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VARNO is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Rentals and VARNO

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

The idea behind United Rentals and VARNO 75 15 JAN 28 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.