Correlation Between United Rentals and Micron Technology
Can any of the company-specific risk be diversified away by investing in both United Rentals and Micron Technology 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 Micron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Micron Technology, you can compare the effects of market volatilities on United Rentals and Micron Technology 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 Micron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Micron Technology.
Diversification Opportunities for United Rentals and Micron Technology
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Micron is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of United Rentals i.e., United Rentals and Micron Technology go up and down completely randomly.
Pair Corralation between United Rentals and Micron Technology
Assuming the 90 days trading horizon United Rentals is expected to generate 1.24 times more return on investment than Micron Technology. However, United Rentals is 1.24 times more volatile than Micron Technology. It trades about 0.13 of its potential returns per unit of risk. Micron Technology is currently generating about -0.12 per unit of risk. If you would invest 16,724 in United Rentals on August 30, 2024 and sell it today you would earn a total of 1,468 from holding United Rentals or generate 8.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Rentals vs. Micron Technology
Performance |
| Timeline |
| United Rentals |
| Micron Technology |
United Rentals and Micron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and Micron Technology
The main advantage of trading using opposite United Rentals and Micron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Micron Technology 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 Micron Technology will offset losses from the drop in Micron Technology's long position.The idea behind United Rentals and Micron Technology 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.| Micron Technology vs. GP Investments | Micron Technology vs. Lupatech SA | Micron Technology vs. Marvell Technology | Micron Technology vs. Livetech da Bahia |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
Other Complementary Tools
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Stocks Directory Find actively traded stocks across global markets | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |