Correlation Between UNITED RENTALS and Webster Financial
Can any of the company-specific risk be diversified away by investing in both UNITED RENTALS and Webster Financial 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 Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UNITED RENTALS and Webster Financial, you can compare the effects of market volatilities on UNITED RENTALS and Webster Financial 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 Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED RENTALS and Webster Financial.
Diversification Opportunities for UNITED RENTALS and Webster Financial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between UNITED and Webster is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial 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 Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and Webster Financial go up and down completely randomly.
Pair Corralation between UNITED RENTALS and Webster Financial
Assuming the 90 days trading horizon UNITED RENTALS is expected to generate 2.57 times less return on investment than Webster Financial. But when comparing it to its historical volatility, UNITED RENTALS is 1.59 times less risky than Webster Financial. It trades about 0.17 of its potential returns per unit of risk. Webster Financial is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 4,681 in Webster Financial on August 29, 2024 and sell it today you would earn a total of 1,219 from holding Webster Financial or generate 26.04% 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. Webster Financial
Performance |
| Timeline |
| UNITED RENTALS |
| Webster Financial |
UNITED RENTALS and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UNITED RENTALS and Webster Financial
The main advantage of trading using opposite UNITED RENTALS and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED RENTALS position performs unexpectedly, Webster Financial 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 Webster Financial will offset losses from the drop in Webster Financial's long position.| UNITED RENTALS vs. Laureate Education | UNITED RENTALS vs. Darden Restaurants | UNITED RENTALS vs. MEDICAL FACILITIES NEW | UNITED RENTALS vs. ScanSource |
| Webster Financial vs. Superior Plus Corp | Webster Financial vs. NMI Holdings | Webster Financial vs. Origin Agritech | Webster Financial vs. SIVERS SEMICONDUCTORS AB |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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