Correlation Between United Rentals and SOUTHERN

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Can any of the company-specific risk be diversified away by investing in both United Rentals and SOUTHERN 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 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 EDISON, you can compare the effects of market volatilities on United Rentals and SOUTHERN 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and SOUTHERN.

Diversification Opportunities for United Rentals and SOUTHERN

0.11
  Correlation Coefficient

Average diversification

The 3 months correlation between United and SOUTHERN is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and SOUTHERN CALIFORNIA EDISON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHERN CALIFORNIA 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. 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 has no effect on the direction of United Rentals i.e., United Rentals and SOUTHERN go up and down completely randomly.

Pair Corralation between United Rentals and SOUTHERN

Considering the 90-day investment horizon United Rentals is expected to generate 1.31 times more return on investment than SOUTHERN. However, United Rentals is 1.31 times more volatile than SOUTHERN CALIFORNIA EDISON. It trades about 0.2 of its potential returns per unit of risk. SOUTHERN CALIFORNIA EDISON is currently generating about -0.1 per unit of risk. If you would invest  78,451  in United Rentals on September 5, 2024 and sell it today you would earn a total of  8,451  from holding United Rentals or generate 10.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy72.73%
ValuesDaily Returns

United Rentals  vs.  SOUTHERN CALIFORNIA EDISON

 Performance 
       Timeline  
United Rentals 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, United Rentals demonstrated solid returns over the last few months and may actually be approaching a breakup point.
SOUTHERN CALIFORNIA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SOUTHERN CALIFORNIA EDISON has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for SOUTHERN CALIFORNIA EDISON investors.

United Rentals and SOUTHERN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Rentals and SOUTHERN

The main advantage of trading using opposite United Rentals and SOUTHERN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, SOUTHERN 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 will offset losses from the drop in SOUTHERN's long position.
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The idea behind United Rentals and SOUTHERN CALIFORNIA EDISON pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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