Correlation Between UNITED RENTALS and Cognex

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

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

Diversification Opportunities for UNITED RENTALS and Cognex

0.77

Correlation Coefficient

UNITED RENTALS  Cognex

Poor diversification

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

Pair Corralation between UNITED RENTALS and Cognex

Assuming the 90 days trading horizon UNITED RENTALS is expected to under-perform the Cognex. In addition to that, UNITED RENTALS is 1.02 times more volatile than Cognex. It trades about -0.02 of its total potential returns per unit of risk. Cognex is currently generating about 0.0 per unit of volatility. If you would invest  3,589  in Cognex on September 29, 2024 and sell it today you would lose (50.00) from holding Cognex or give up 1.39% of portfolio value over 90 days.

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

UNITED RENTALS  vs.  Cognex

UNITED RENTALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNITED RENTALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, UNITED RENTALS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cognex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cognex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cognex is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with UNITED RENTALS and Cognex

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

The idea behind UNITED RENTALS and Cognex 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.