Correlation Between Pentair PLC and United Rentals

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Can any of the company-specific risk be diversified away by investing in both Pentair PLC 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 Pentair PLC and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pentair PLC and United Rentals, you can compare the effects of market volatilities on Pentair PLC 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 Pentair PLC with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pentair PLC and United Rentals.

Diversification Opportunities for Pentair PLC and United Rentals

0.92
  Correlation Coefficient

Almost no diversification

The 24 months correlation between Pentair and United is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Pentair PLC and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Pentair PLC 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 Pentair PLC 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 Pentair PLC i.e., Pentair PLC and United Rentals go up and down completely randomly.

Pair Corralation between Pentair PLC and United Rentals

Considering the 90-day investment horizon Pentair PLC is expected to generate 0.88 times more return on investment than United Rentals. However, Pentair PLC is 1.14 times less risky than United Rentals. It trades about 0.37 of its potential returns per unit of risk. United Rentals is currently generating about 0.15 per unit of risk. If you would invest  7,667  in Pentair PLC on December 30, 2023 and sell it today you would earn a total of  877.00  from holding Pentair PLC or generate 11.44% return on investment over 90 days.
Time Period24 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Pentair PLC  vs.  United Rentals

 Performance 
       Timeline  
Pentair PLC 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Pentair PLC may actually be approaching a critical reversion point that can send shares even higher in April 2024.
United Rentals 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 6 (%) 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.

Pentair PLC and United Rentals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pentair PLC and United Rentals

The main advantage of trading using opposite Pentair PLC and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pentair PLC 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 Pentair PLC 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.
Check out your portfolio center.
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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