Correlation Between United Rentals and Shake Shack
Can any of the company-specific risk be diversified away by investing in both United Rentals and Shake Shack 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 Shake Shack into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Shake Shack, you can compare the effects of market volatilities on United Rentals and Shake Shack 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 Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Shake Shack.
Diversification Opportunities for United Rentals and Shake Shack
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Shake is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack 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 Shake Shack. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shake Shack has no effect on the direction of United Rentals i.e., United Rentals and Shake Shack go up and down completely randomly.
Pair Corralation between United Rentals and Shake Shack
Considering the 90-day investment horizon United Rentals is expected to generate 1.09 times more return on investment than Shake Shack. However, United Rentals is 1.09 times more volatile than Shake Shack. It trades about 0.2 of its potential returns per unit of risk. Shake Shack is currently generating about 0.18 per unit of risk. If you would invest 78,451 in United Rentals on September 3, 2024 and sell it today you would earn a total of 8,149 from holding United Rentals or generate 10.39% 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. Shake Shack
Performance |
| Timeline |
| United Rentals |
| Shake Shack |
United Rentals and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and Shake Shack
The main advantage of trading using opposite United Rentals and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Shake Shack 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 Shake Shack will offset losses from the drop in Shake Shack's long position.| United Rentals vs. Alta Equipment Group | United Rentals vs. McGrath RentCorp | United Rentals vs. Herc Holdings | United Rentals vs. HE Equipment Services |
| Shake Shack vs. Highway Holdings Limited | Shake Shack vs. QCR Holdings | Shake Shack vs. Partner Communications | Shake Shack vs. Acumen Pharmaceuticals |
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 Stocks Directory module to find actively traded stocks across global markets.
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