Correlation Between Rockwell Automation and United Rentals

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

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

Diversification Opportunities for Rockwell Automation and United Rentals

-0.24

Correlation Coefficient

Rockwell Automation  United Rentals

Very good diversification

The 3 months correlation between Rockwell and United is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Rockwell Automation and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Rockwell Automation 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 Rockwell Automation are associated (or correlated) with United Rentals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals has no effect on the direction of Rockwell Automation i.e., Rockwell Automation and United Rentals go up and down completely randomly.

Pair Corralation between Rockwell Automation and United Rentals

Considering the 90-day investment horizon Rockwell Automation is expected to generate 1.03 times more return on investment than United Rentals. However, Rockwell Automation is 1.03 times more volatile than United Rentals. It trades about -0.08 of its potential returns per unit of risk. United Rentals is currently generating about -0.36 per unit of risk. If you would invest  28,178  in Rockwell Automation on January 20, 2024 and sell it today you would lose (828.00) from holding Rockwell Automation or give up 2.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Rockwell Automation  vs.  United Rentals

Rockwell Automation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rockwell Automation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

United Rentals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, United Rentals may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Rockwell Automation and United Rentals

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

The idea behind Rockwell Automation and United Rentals 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.