Correlation Between United Rentals and TechnipFMC PLC
Can any of the company-specific risk be diversified away by investing in both United Rentals and TechnipFMC PLC 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 TechnipFMC PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and TechnipFMC PLC, you can compare the effects of market volatilities on United Rentals and TechnipFMC PLC 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 TechnipFMC PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and TechnipFMC PLC.
Diversification Opportunities for United Rentals and TechnipFMC PLC
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and TechnipFMC is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC 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 TechnipFMC PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TechnipFMC PLC has no effect on the direction of United Rentals i.e., United Rentals and TechnipFMC PLC go up and down completely randomly.
Pair Corralation between United Rentals and TechnipFMC PLC
Assuming the 90 days horizon United Rentals is expected to generate 1.7 times less return on investment than TechnipFMC PLC. In addition to that, United Rentals is 1.29 times more volatile than TechnipFMC PLC. It trades about 0.12 of its total potential returns per unit of risk. TechnipFMC PLC is currently generating about 0.27 per unit of volatility. If you would invest 2,269 in TechnipFMC PLC on August 28, 2024 and sell it today you would earn a total of 643.00 from holding TechnipFMC PLC or generate 28.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Rentals vs. TechnipFMC PLC
Performance |
| Timeline |
| United Rentals |
| TechnipFMC PLC |
United Rentals and TechnipFMC PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and TechnipFMC PLC
The main advantage of trading using opposite United Rentals and TechnipFMC PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, TechnipFMC PLC 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 TechnipFMC PLC will offset losses from the drop in TechnipFMC PLC's long position.| United Rentals vs. 24SEVENOFFICE GROUP AB | United Rentals vs. Corporate Office Properties | United Rentals vs. MTI WIRELESS EDGE | United Rentals vs. CITY OFFICE REIT |
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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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