Correlation Between United Rentals and PulteGroup

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

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

Diversification Opportunities for United Rentals and PulteGroup

0.71

Correlation Coefficient

United Rentals  PulteGroup

Poor diversification

The 3 months correlation between United and PulteGroup is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and PulteGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PulteGroup 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 PulteGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PulteGroup has no effect on the direction of United Rentals i.e., United Rentals and PulteGroup go up and down completely randomly.

Pair Corralation between United Rentals and PulteGroup

Considering the 90-day investment horizon United Rentals is expected to generate 1.36 times more return on investment than PulteGroup. However, United Rentals is 1.36 times more volatile than PulteGroup. It trades about 0.07 of its potential returns per unit of risk. PulteGroup is currently generating about 0.04 per unit of risk. If you would invest  65,974  in United Rentals on February 23, 2024 and sell it today you would earn a total of  2,286  from holding United Rentals or generate 3.47% return on investment over 90 days.

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

United Rentals  vs.  PulteGroup

United Rentals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, United Rentals is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

PulteGroup

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PulteGroup are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, PulteGroup may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with United Rentals and PulteGroup

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

The idea behind United Rentals and PulteGroup 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.