Correlation Between United Rentals and BMO SIA
Can any of the company-specific risk be diversified away by investing in both United Rentals and BMO SIA 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 BMO SIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and BMO SIA Focused, you can compare the effects of market volatilities on United Rentals and BMO SIA 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 BMO SIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and BMO SIA.
Diversification Opportunities for United Rentals and BMO SIA
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and BMO is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and BMO SIA Focused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMO SIA Focused 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 BMO SIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMO SIA Focused has no effect on the direction of United Rentals i.e., United Rentals and BMO SIA go up and down completely randomly.
Pair Corralation between United Rentals and BMO SIA
Considering the 90-day investment horizon United Rentals is expected to under-perform the BMO SIA. In addition to that, United Rentals is 2.94 times more volatile than BMO SIA Focused. It trades about -0.22 of its total potential returns per unit of risk. BMO SIA Focused is currently generating about 0.21 per unit of volatility. If you would invest 4,645 in BMO SIA Focused on September 12, 2024 and sell it today you would earn a total of 124.00 from holding BMO SIA Focused or generate 2.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
United Rentals vs. BMO SIA Focused
Performance |
| Timeline |
| United Rentals |
| BMO SIA Focused |
United Rentals and BMO SIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and BMO SIA
The main advantage of trading using opposite United Rentals and BMO SIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, BMO SIA 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 BMO SIA will offset losses from the drop in BMO SIA'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 |
| BMO SIA vs. BMO SIA Focused | BMO SIA vs. BMO MSCI USA | BMO SIA vs. BMO MSCI Canada | BMO SIA vs. BMO Low Volatility |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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