Correlation Between United Rentals and Southern California
Can any of the company-specific risk be diversified away by investing in both United Rentals and Southern California 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 Southern California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Southern California Gas, you can compare the effects of market volatilities on United Rentals and Southern California 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 Southern California. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Southern California.
Diversification Opportunities for United Rentals and Southern California
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between United and Southern is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Southern California Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern California Gas 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 Southern California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern California Gas has no effect on the direction of United Rentals i.e., United Rentals and Southern California go up and down completely randomly.
Pair Corralation between United Rentals and Southern California
Considering the 90-day investment horizon United Rentals is expected to generate 0.66 times more return on investment than Southern California. However, United Rentals is 1.52 times less risky than Southern California. It trades about 0.09 of its potential returns per unit of risk. Southern California Gas is currently generating about 0.02 per unit of risk. If you would invest 35,864 in United Rentals on September 3, 2024 and sell it today you would earn a total of 50,736 from holding United Rentals or generate 141.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 89.49% |
| Values | Daily Returns |
United Rentals vs. Southern California Gas
Performance |
| Timeline |
| United Rentals |
| Southern California Gas |
United Rentals and Southern California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and Southern California
The main advantage of trading using opposite United Rentals and Southern California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Southern California 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 Southern California will offset losses from the drop in Southern California'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 |
| Southern California vs. Dynagas LNG Partners | Southern California vs. GasLog Partners LP | Southern California vs. GasLog Partners LP | Southern California vs. Genesis Energy LP |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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