Correlation Between Methode Electronics and United Rentals
Can any of the company-specific risk be diversified away by investing in both Methode Electronics 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 Methode Electronics and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and United Rentals, you can compare the effects of market volatilities on Methode Electronics 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 Methode Electronics with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and United Rentals.
Diversification Opportunities for Methode Electronics and United Rentals
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Methode and United is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Methode Electronics 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 Methode Electronics 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 Methode Electronics i.e., Methode Electronics and United Rentals go up and down completely randomly.
Pair Corralation between Methode Electronics and United Rentals
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the United Rentals. In addition to that, Methode Electronics is 1.03 times more volatile than United Rentals. It trades about -0.09 of its total potential returns per unit of risk. United Rentals is currently generating about 0.05 per unit of volatility. If you would invest 75,010 in United Rentals on August 25, 2024 and sell it today you would earn a total of 2,270 from holding United Rentals or generate 3.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. United Rentals
Performance |
| Timeline |
| Methode Electronics |
| United Rentals |
Methode Electronics and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and United Rentals
The main advantage of trading using opposite Methode Electronics and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics 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' long position.The idea behind Methode Electronics and United Rentals 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.| United Rentals vs. Chuangs China Investments | United Rentals vs. KINGBOARD CHEMICAL | United Rentals vs. Gladstone Investment | United Rentals vs. China BlueChemical |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |