Correlation Between United Rentals and Prudential Short-term

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

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

Diversification Opportunities for United Rentals and Prudential Short-term

-0.25

Correlation Coefficient

United Rentals  Prudential Short-term

Very good diversification

The 3 months correlation between United and PRUDENTIAL is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Prudential Short Term Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Short Term 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 Prudential Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Short Term has no effect on the direction of United Rentals i.e., United Rentals and Prudential Short-term go up and down completely randomly.

Pair Corralation between United Rentals and Prudential Short-term

Considering the 90-day investment horizon United Rentals is expected to generate 13.1 times more return on investment than Prudential Short-term. However, United Rentals is 13.1 times more volatile than Prudential Short Term Porate. It trades about 0.18 of its potential returns per unit of risk. Prudential Short Term Porate is currently generating about 0.04 per unit of risk. If you would invest  70,053  in United Rentals on September 3, 2024 and sell it today you would earn a total of  16,547  from holding United Rentals or generate 23.62% return on investment over 90 days.

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

United Rentals  vs.  Prudential Short Term Porate

United Rentals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, United Rentals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Prudential Short Term

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Short Term Porate are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Prudential Short-term is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Rentals and Prudential Short-term

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

The idea behind United Rentals and Prudential Short Term Porate 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.