Correlation Between Gamma Communications and UNITED RENTALS
Can any of the company-specific risk be diversified away by investing in both Gamma Communications 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 Gamma Communications and UNITED RENTALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications plc and UNITED RENTALS, you can compare the effects of market volatilities on Gamma Communications 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 Gamma Communications with a short position of UNITED RENTALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and UNITED RENTALS.
Diversification Opportunities for Gamma Communications and UNITED RENTALS
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Gamma and UNITED is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications plc and UNITED RENTALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED RENTALS and Gamma Communications 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 Gamma Communications 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 Gamma Communications i.e., Gamma Communications and UNITED RENTALS go up and down completely randomly.
Pair Corralation between Gamma Communications and UNITED RENTALS
Assuming the 90 days horizon Gamma Communications plc is expected to under-perform the UNITED RENTALS. But the stock apears to be less risky and, when comparing its historical volatility, Gamma Communications plc is 1.71 times less risky than UNITED RENTALS. The stock trades about -0.06 of its potential returns per unit of risk. The UNITED RENTALS is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 74,970 in UNITED RENTALS on August 29, 2024 and sell it today you would earn a total of 7,050 from holding UNITED RENTALS or generate 9.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gamma Communications plc vs. UNITED RENTALS
Performance |
| Timeline |
| Gamma Communications plc |
| UNITED RENTALS |
Gamma Communications and UNITED RENTALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and UNITED RENTALS
The main advantage of trading using opposite Gamma Communications and UNITED RENTALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications 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's long position.| Gamma Communications vs. QINGCI GAMES INC | Gamma Communications vs. TROPHY GAMES DEV | Gamma Communications vs. GigaMedia | Gamma Communications vs. Perseus Mining Limited |
| UNITED RENTALS vs. Laureate Education | UNITED RENTALS vs. Darden Restaurants | UNITED RENTALS vs. MEDICAL FACILITIES NEW | UNITED RENTALS vs. ScanSource |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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