Correlation Between United Rentals and RIV Capital

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

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

Diversification Opportunities for United Rentals and RIV Capital

-0.5

Correlation Coefficient

United Rentals  RIV Capital

Very good diversification

The 3 months correlation between United and RIV is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and RIV Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RIV Capital 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 RIV Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RIV Capital has no effect on the direction of United Rentals i.e., United Rentals and RIV Capital go up and down completely randomly.

Pair Corralation between United Rentals and RIV Capital

Considering the 90-day investment horizon United Rentals is expected to generate 1.36 times less return on investment than RIV Capital. But when comparing it to its historical volatility, United Rentals is 4.1 times less risky than RIV Capital. It trades about 0.1 of its potential returns per unit of risk. RIV Capital is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  11.00  in RIV Capital on September 12, 2024 and sell it today you would lose (1.00) from holding RIV Capital or give up 9.09% of portfolio value over 90 days.

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

United Rentals  vs.  RIV Capital

United Rentals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, United Rentals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

RIV Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RIV Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with United Rentals and RIV Capital

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

The idea behind United Rentals and RIV Capital 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.