Correlation Between PROG Holdings and McGrath RentCorp

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

Diversification Opportunities for PROG Holdings and McGrath RentCorp

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between PROG and McGrath is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding PROG Holdings and McGrath RentCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McGrath RentCorp and PROG Holdings 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 PROG Holdings are associated (or correlated) with McGrath RentCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McGrath RentCorp has no effect on the direction of PROG Holdings i.e., PROG Holdings and McGrath RentCorp go up and down completely randomly.

Pair Corralation between PROG Holdings and McGrath RentCorp

Considering the 90-day investment horizon PROG Holdings is expected to generate 2.05 times more return on investment than McGrath RentCorp. However, PROG Holdings is 2.05 times more volatile than McGrath RentCorp. It trades about 0.1 of its potential returns per unit of risk. McGrath RentCorp is currently generating about -0.24 per unit of risk. If you would invest  3,175  in PROG Holdings on February 5, 2024 and sell it today you would earn a total of  273.00  from holding PROG Holdings or generate 8.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

PROG Holdings  vs.  McGrath RentCorp

 Performance 
       Timeline  
PROG Holdings 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in PROG Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, PROG Holdings reported solid returns over the last few months and may actually be approaching a breakup point.
McGrath RentCorp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

PROG Holdings and McGrath RentCorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PROG Holdings and McGrath RentCorp

The main advantage of trading using opposite PROG Holdings and McGrath RentCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PROG Holdings position performs unexpectedly, McGrath RentCorp 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 McGrath RentCorp will offset losses from the drop in McGrath RentCorp's long position.
The idea behind PROG Holdings and McGrath RentCorp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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