Correlation Between UNITED RENTALS and TRAVIS PERKINS

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

By analyzing existing cross correlation between UNITED RENTALS and TRAVIS PERKINS LS 1, you can compare the effects of market volatilities on UNITED RENTALS and TRAVIS PERKINS 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 TRAVIS PERKINS. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED RENTALS and TRAVIS PERKINS.

Diversification Opportunities for UNITED RENTALS and TRAVIS PERKINS

-0.37

Correlation Coefficient

UNITED RENTALS  TRAVIS PERKINS

Very good diversification

The 3 months correlation between UNITED and TRAVIS is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and TRAVIS PERKINS LS 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVIS PERKINS LS 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 TRAVIS PERKINS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVIS PERKINS LS has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and TRAVIS PERKINS go up and down completely randomly.

Pair Corralation between UNITED RENTALS and TRAVIS PERKINS

Assuming the 90 days trading horizon UNITED RENTALS is expected to under-perform the TRAVIS PERKINS. In addition to that, UNITED RENTALS is 1.1 times more volatile than TRAVIS PERKINS LS 1. It trades about -0.42 of its total potential returns per unit of risk. TRAVIS PERKINS LS 1 is currently generating about -0.36 per unit of volatility. If you would invest  945.00  in TRAVIS PERKINS LS 1 on September 23, 2024 and sell it today you would lose (110.00) from holding TRAVIS PERKINS LS 1 or give up 11.64% of portfolio value over 90 days.

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

UNITED RENTALS  vs.  TRAVIS PERKINS LS 1

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

TRAVIS PERKINS LS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRAVIS PERKINS LS 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with UNITED RENTALS and TRAVIS PERKINS

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

The idea behind UNITED RENTALS and TRAVIS PERKINS LS 1 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.