Correlation Between United Rentals and Whiting Petroleum

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

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

Diversification Opportunities for United Rentals and Whiting Petroleum

-0.74

Correlation Coefficient

United Rentals  Whiting Petroleum

Pay attention - limited upside

The 3 months correlation between United and Whiting is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Whiting Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whiting Petroleum 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 Whiting Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whiting Petroleum has no effect on the direction of United Rentals i.e., United Rentals and Whiting Petroleum go up and down completely randomly.

Pair Corralation between United Rentals and Whiting Petroleum

Considering the 90-day investment horizon United Rentals is expected to generate 0.17 times more return on investment than Whiting Petroleum. However, United Rentals is 6.0 times less risky than Whiting Petroleum. It trades about 0.18 of its potential returns per unit of risk. Whiting Petroleum is currently generating about -0.05 per unit of risk. If you would invest  69,926  in United Rentals on September 4, 2024 and sell it today you would earn a total of  15,779  from holding United Rentals or generate 22.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

United Rentals  vs.  Whiting Petroleum

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 uncertain basic indicators, United Rentals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Whiting Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whiting Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with United Rentals and Whiting Petroleum

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

The idea behind United Rentals and Whiting Petroleum 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.