Correlation Between Zebra Technologies and United Rentals

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

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

Diversification Opportunities for Zebra Technologies and United Rentals

0.8

Correlation Coefficient

Zebra Technologies  United Rentals

Very poor diversification

The 3 months correlation between Zebra and United is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Zebra Technologies and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Zebra Technologies 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 Zebra Technologies 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 Zebra Technologies i.e., Zebra Technologies and United Rentals go up and down completely randomly.

Pair Corralation between Zebra Technologies and United Rentals

Given the investment horizon of 90 days Zebra Technologies is expected to generate 5.86 times less return on investment than United Rentals. In addition to that, Zebra Technologies is 1.16 times more volatile than United Rentals. It trades about 0.02 of its total potential returns per unit of risk. United Rentals is currently generating about 0.14 per unit of volatility. If you would invest  33,089  in United Rentals on January 19, 2024 and sell it today you would earn a total of  30,199  from holding United Rentals or generate 91.27% return on investment over 90 days.

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

Zebra Technologies  vs.  United Rentals

Zebra Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zebra Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Zebra Technologies may actually be approaching a critical reversion point that can send shares even higher in May 2024.

United Rentals

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, United Rentals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zebra Technologies and United Rentals

The main advantage of trading using opposite Zebra Technologies and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zebra Technologies 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 Zebra Technologies 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.