Correlation Between Pan American and United Rentals
Can any of the company-specific risk be diversified away by investing in both Pan American 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 Pan American and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pan American Silver and United Rentals, you can compare the effects of market volatilities on Pan American 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 Pan American with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan American and United Rentals.
Diversification Opportunities for Pan American and United Rentals
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pan and United is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Pan American Silver and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Pan American 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 Pan American Silver 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 Pan American i.e., Pan American and United Rentals go up and down completely randomly.
Pair Corralation between Pan American and United Rentals
Assuming the 90 days horizon Pan American is expected to generate 2.23 times less return on investment than United Rentals. In addition to that, Pan American is 1.05 times more volatile than United Rentals. It trades about 0.03 of its total potential returns per unit of risk. United Rentals is currently generating about 0.07 per unit of volatility. If you would invest 33,436 in United Rentals on October 11, 2024 and sell it today you would earn a total of 32,824 from holding United Rentals or generate 98.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pan American Silver vs. United Rentals
Performance |
| Timeline |
| Pan American Silver |
| United Rentals |
Pan American and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pan American and United Rentals
The main advantage of trading using opposite Pan American and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pan American 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.| Pan American vs. United Rentals | Pan American vs. Boyd Gaming | Pan American vs. UNITED RENTALS | Pan American vs. FUTURE GAMING GRP |
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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