Correlation Between Japan Post and United Rentals
Can any of the company-specific risk be diversified away by investing in both Japan Post 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 Japan Post and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Post Insurance and United Rentals, you can compare the effects of market volatilities on Japan Post 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 Japan Post with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Post and United Rentals.
Diversification Opportunities for Japan Post and United Rentals
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Japan and United is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Japan Post 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 Japan Post Insurance 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 Japan Post i.e., Japan Post and United Rentals go up and down completely randomly.
Pair Corralation between Japan Post and United Rentals
Assuming the 90 days trading horizon Japan Post Insurance is expected to generate 0.68 times more return on investment than United Rentals. However, Japan Post Insurance is 1.48 times less risky than United Rentals. It trades about 0.49 of its potential returns per unit of risk. United Rentals is currently generating about 0.14 per unit of risk. If you would invest 1,470 in Japan Post Insurance on August 29, 2024 and sell it today you would earn a total of 440.00 from holding Japan Post Insurance or generate 29.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Japan Post Insurance vs. United Rentals
Performance |
| Timeline |
| Japan Post Insurance |
| United Rentals |
Japan Post and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Post and United Rentals
The main advantage of trading using opposite Japan Post and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Post 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 Japan Post Insurance 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.| United Rentals vs. Superior Plus Corp | United Rentals vs. SIVERS SEMICONDUCTORS AB | United Rentals vs. Talanx AG | United Rentals vs. 2G ENERGY |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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