Correlation Between McGrath RentCorp and BrightView Holdings

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

By analyzing existing cross correlation between McGrath RentCorp and BrightView Holdings, you can compare the effects of market volatilities on McGrath RentCorp and BrightView Holdings 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 McGrath RentCorp with a short position of BrightView Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of McGrath RentCorp and BrightView Holdings.

Diversification Opportunities for McGrath RentCorp and BrightView Holdings

-0.66

Correlation Coefficient

McGrath RentCorp  BrightView Holdings

Excellent diversification

The 3 months correlation between McGrath and BrightView is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding McGrath RentCorp and BrightView Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightView Holdings and McGrath RentCorp 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 McGrath RentCorp are associated (or correlated) with BrightView Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrightView Holdings has no effect on the direction of McGrath RentCorp i.e., McGrath RentCorp and BrightView Holdings go up and down completely randomly.

Pair Corralation between McGrath RentCorp and BrightView Holdings

Given the investment horizon of 90 days McGrath RentCorp is expected to under-perform the BrightView Holdings. But the stock apears to be less risky and, when comparing its historical volatility, McGrath RentCorp is 2.5 times less risky than BrightView Holdings. The stock trades about -0.16 of its potential returns per unit of risk. The BrightView Holdings is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  860.00  in BrightView Holdings on February 28, 2024 and sell it today you would earn a total of  562.00  from holding BrightView Holdings or generate 65.35% return on investment over 90 days.

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

McGrath RentCorp  vs.  BrightView Holdings

McGrath RentCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days McGrath RentCorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

BrightView Holdings

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BrightView Holdings are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BrightView Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with McGrath RentCorp and BrightView Holdings

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

The idea behind McGrath RentCorp and BrightView Holdings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.