Correlation Between United Rentals and METHODE ELECTRONICS
Can any of the company-specific risk be diversified away by investing in both United Rentals and METHODE ELECTRONICS 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 METHODE ELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and METHODE ELECTRONICS, you can compare the effects of market volatilities on United Rentals and METHODE ELECTRONICS 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 METHODE ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and METHODE ELECTRONICS.
Diversification Opportunities for United Rentals and METHODE ELECTRONICS
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between United and METHODE is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and METHODE ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METHODE ELECTRONICS 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 METHODE ELECTRONICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METHODE ELECTRONICS has no effect on the direction of United Rentals i.e., United Rentals and METHODE ELECTRONICS go up and down completely randomly.
Pair Corralation between United Rentals and METHODE ELECTRONICS
Assuming the 90 days horizon United Rentals is expected to generate 2.38 times less return on investment than METHODE ELECTRONICS. But when comparing it to its historical volatility, United Rentals is 1.2 times less risky than METHODE ELECTRONICS. It trades about 0.05 of its potential returns per unit of risk. METHODE ELECTRONICS is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 895.00 in METHODE ELECTRONICS on August 25, 2024 and sell it today you would earn a total of 80.00 from holding METHODE ELECTRONICS or generate 8.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
United Rentals vs. METHODE ELECTRONICS
Performance |
| Timeline |
| United Rentals |
| METHODE ELECTRONICS |
United Rentals and METHODE ELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and METHODE ELECTRONICS
The main advantage of trading using opposite United Rentals and METHODE ELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, METHODE ELECTRONICS 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 METHODE ELECTRONICS will offset losses from the drop in METHODE ELECTRONICS's long position.| United Rentals vs. Chuangs China Investments | United Rentals vs. KINGBOARD CHEMICAL | United Rentals vs. Gladstone Investment | United Rentals vs. China BlueChemical |
| METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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