Correlation Between United Rentals and Invesco Health

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

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

Diversification Opportunities for United Rentals and Invesco Health

-0.63

Correlation Coefficient

United Rentals  Invesco Health

Excellent diversification

The 3 months correlation between United and Invesco is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Invesco Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Health Care 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 Invesco Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Health Care has no effect on the direction of United Rentals i.e., United Rentals and Invesco Health go up and down completely randomly.

Pair Corralation between United Rentals and Invesco Health

Considering the 90-day investment horizon United Rentals is expected to generate 2.72 times more return on investment than Invesco Health. However, United Rentals is 2.72 times more volatile than Invesco Health Care. It trades about 0.18 of its potential returns per unit of risk. Invesco Health Care is currently generating about -0.14 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	98.46%
Values	Daily Returns

United Rentals  vs.  Invesco Health Care

United Rentals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 13 (%) 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.

Invesco Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Invesco Health is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United Rentals and Invesco Health

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

The idea behind United Rentals and Invesco Health Care 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.