Correlation Between United Rentals and CMS Energy
Can any of the company-specific risk be diversified away by investing in both United Rentals and CMS Energy 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 CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and CMS Energy, you can compare the effects of market volatilities on United Rentals and CMS Energy 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 CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and CMS Energy.
Diversification Opportunities for United Rentals and CMS Energy
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between United and CMS is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and CMS Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy 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 CMS Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMS Energy has no effect on the direction of United Rentals i.e., United Rentals and CMS Energy go up and down completely randomly.
Pair Corralation between United Rentals and CMS Energy
Assuming the 90 days horizon United Rentals is expected to generate 1.58 times more return on investment than CMS Energy. However, United Rentals is 1.58 times more volatile than CMS Energy. It trades about 0.31 of its potential returns per unit of risk. CMS Energy is currently generating about 0.11 per unit of risk. If you would invest 68,120 in United Rentals on October 25, 2024 and sell it today you would earn a total of 7,420 from holding United Rentals or generate 10.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Rentals vs. CMS Energy
Performance |
| Timeline |
| United Rentals |
| CMS Energy |
United Rentals and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and CMS Energy
The main advantage of trading using opposite United Rentals and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, CMS Energy 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 CMS Energy will offset losses from the drop in CMS Energy's long position.| United Rentals vs. Information Services International Dentsu | United Rentals vs. BURLINGTON STORES | United Rentals vs. Stewart Information Services | United Rentals vs. SPARTAN STORES |
| CMS Energy vs. PURE FOODS TASMANIA | CMS Energy vs. ALBIS LEASING AG | CMS Energy vs. United Rentals | CMS Energy vs. National Beverage Corp |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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