Correlation Between United Rentals and CoStar

Can any of the company-specific risk be diversified away by investing in both United Rentals and CoStar 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 CoStar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United Rentals and CoStar Group, you can compare the effects of market volatilities on United Rentals and CoStar 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 CoStar. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and CoStar.

Diversification Opportunities for United Rentals and CoStar

0.77

Correlation Coefficient

United Rentals  CoStar

Poor diversification

The 3 months correlation between United and CoStar is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and CoStar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoStar Group 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 CoStar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoStar Group has no effect on the direction of United Rentals i.e., United Rentals and CoStar go up and down completely randomly.

Pair Corralation between United Rentals and CoStar

Assuming the 90 days trading horizon United Rentals is expected to generate 3.08 times less return on investment than CoStar. In addition to that, United Rentals is 1.04 times more volatile than CoStar Group. It trades about 0.02 of its total potential returns per unit of risk. CoStar Group is currently generating about 0.06 per unit of volatility. If you would invest  405.00  in CoStar Group on September 27, 2024 and sell it today you would earn a total of  28.00  from holding CoStar Group or generate 6.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

United Rentals  vs.  CoStar Group

United Rentals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, United Rentals is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

CoStar Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CoStar Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, CoStar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United Rentals and CoStar

The main advantage of trading using opposite United Rentals and CoStar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, CoStar 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 CoStar will offset losses from the drop in CoStar's long position.

The idea behind United Rentals and CoStar Group 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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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.