Correlation Between PREMIER FOODS and UNITED RENTALS
Can any of the company-specific risk be diversified away by investing in both PREMIER FOODS and UNITED RENTALS 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 PREMIER FOODS and UNITED RENTALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PREMIER FOODS and UNITED RENTALS, you can compare the effects of market volatilities on PREMIER FOODS and UNITED RENTALS 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 PREMIER FOODS with a short position of UNITED RENTALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of PREMIER FOODS and UNITED RENTALS.
Diversification Opportunities for PREMIER FOODS and UNITED RENTALS
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PREMIER and UNITED is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and UNITED RENTALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED RENTALS and PREMIER FOODS 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 PREMIER FOODS are associated (or correlated) with UNITED RENTALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED RENTALS has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and UNITED RENTALS go up and down completely randomly.
Pair Corralation between PREMIER FOODS and UNITED RENTALS
Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 1.34 times less return on investment than UNITED RENTALS. But when comparing it to its historical volatility, PREMIER FOODS is 1.54 times less risky than UNITED RENTALS. It trades about 0.09 of its potential returns per unit of risk. UNITED RENTALS is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 38,844 in UNITED RENTALS on November 8, 2024 and sell it today you would earn a total of 31,916 from holding UNITED RENTALS or generate 82.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PREMIER FOODS vs. UNITED RENTALS
Performance |
| Timeline |
| PREMIER FOODS |
| UNITED RENTALS |
PREMIER FOODS and UNITED RENTALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PREMIER FOODS and UNITED RENTALS
The main advantage of trading using opposite PREMIER FOODS and UNITED RENTALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PREMIER FOODS position performs unexpectedly, UNITED RENTALS 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 RENTALS will offset losses from the drop in UNITED RENTALS's long position.| PREMIER FOODS vs. Singapore Telecommunications Limited | PREMIER FOODS vs. MAVEN WIRELESS SWEDEN | PREMIER FOODS vs. Ribbon Communications | PREMIER FOODS vs. Zoom Video Communications |
| UNITED RENTALS vs. The Trade Desk | UNITED RENTALS vs. MEDCAW INVESTMENTS LS 01 | UNITED RENTALS vs. SEI INVESTMENTS | UNITED RENTALS vs. Gladstone 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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