Correlation Between United Rentals and TerraVest Industries
Can any of the company-specific risk be diversified away by investing in both United Rentals and TerraVest Industries 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 TerraVest Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and TerraVest Industries, you can compare the effects of market volatilities on United Rentals and TerraVest Industries 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 TerraVest Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and TerraVest Industries.
Diversification Opportunities for United Rentals and TerraVest Industries
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and TerraVest is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and TerraVest Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TerraVest Industries 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 TerraVest Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TerraVest Industries has no effect on the direction of United Rentals i.e., United Rentals and TerraVest Industries go up and down completely randomly.
Pair Corralation between United Rentals and TerraVest Industries
Considering the 90-day investment horizon United Rentals is expected to generate 0.79 times more return on investment than TerraVest Industries. However, United Rentals is 1.27 times less risky than TerraVest Industries. It trades about 0.18 of its potential returns per unit of risk. TerraVest Industries is currently generating about 0.12 per unit of risk. If you would invest 70,053 in United Rentals on September 3, 2024 and sell it today you would earn a total of 16,547 from holding United Rentals or generate 23.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.46% |
| Values | Daily Returns |
United Rentals vs. TerraVest Industries
Performance |
| Timeline |
| United Rentals |
| TerraVest Industries |
United Rentals and TerraVest Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and TerraVest Industries
The main advantage of trading using opposite United Rentals and TerraVest Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, TerraVest Industries 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 TerraVest Industries will offset losses from the drop in TerraVest Industries' long position.| United Rentals vs. Alta Equipment Group | United Rentals vs. McGrath RentCorp | United Rentals vs. Herc Holdings | United Rentals vs. HE Equipment Services |
| TerraVest Industries vs. Enterprise Group | TerraVest Industries vs. High Arctic Energy | TerraVest Industries vs. Total Energy Services | TerraVest Industries vs. Trican Well Service |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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