Correlation Between United Rentals and American Beacon
Can any of the company-specific risk be diversified away by investing in both United Rentals and American Beacon 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 American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and American Beacon Shapiro, you can compare the effects of market volatilities on United Rentals and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and American Beacon.
Diversification Opportunities for United Rentals and American Beacon
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and American is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and American Beacon Shapiro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Shapiro 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Shapiro has no effect on the direction of United Rentals i.e., United Rentals and American Beacon go up and down completely randomly.
Pair Corralation between United Rentals and American Beacon
Considering the 90-day investment horizon United Rentals is expected to generate 2.75 times more return on investment than American Beacon. However, United Rentals is 2.75 times more volatile than American Beacon Shapiro. It trades about 0.18 of its potential returns per unit of risk. American Beacon Shapiro is currently generating about 0.33 per unit of risk. If you would invest 78,451 in United Rentals on September 4, 2024 and sell it today you would earn a total of 7,254 from holding United Rentals or generate 9.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
United Rentals vs. American Beacon Shapiro
Performance |
| Timeline |
| United Rentals |
| American Beacon Shapiro |
United Rentals and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and American Beacon
The main advantage of trading using opposite United Rentals and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.| United Rentals vs. HE Equipment Services | United Rentals vs. GATX Corporation | United Rentals vs. McGrath RentCorp | United Rentals vs. Alta Equipment Group |
| American Beacon vs. T Rowe Price | American Beacon vs. T Rowe Price | American Beacon vs. T Rowe Price | American Beacon vs. Transamerica Asset Allocation |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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