Correlation Between African Discovery and United Rentals
Can any of the company-specific risk be diversified away by investing in both African Discovery 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 African Discovery and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between African Discovery Group and United Rentals, you can compare the effects of market volatilities on African Discovery 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 African Discovery with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Discovery and United Rentals.
Diversification Opportunities for African Discovery and United Rentals
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between African and United is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding African Discovery Group and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and African Discovery 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 African Discovery Group 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 African Discovery i.e., African Discovery and United Rentals go up and down completely randomly.
Pair Corralation between African Discovery and United Rentals
Given the investment horizon of 90 days African Discovery Group is expected to under-perform the United Rentals. In addition to that, African Discovery is 2.8 times more volatile than United Rentals. It trades about -0.21 of its total potential returns per unit of risk. United Rentals is currently generating about 0.19 per unit of volatility. If you would invest 78,451 in United Rentals on September 5, 2024 and sell it today you would earn a total of 8,373 from holding United Rentals or generate 10.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
African Discovery Group vs. United Rentals
Performance |
| Timeline |
| African Discovery |
| United Rentals |
African Discovery and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with African Discovery and United Rentals
The main advantage of trading using opposite African Discovery and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Discovery 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.| African Discovery vs. United Rentals | African Discovery vs. Ashtead Gro | African Discovery vs. Ashtead Group plc | African Discovery vs. AerCap Holdings NV |
| United Rentals vs. HE Equipment Services | United Rentals vs. GATX Corporation | United Rentals vs. McGrath RentCorp | United Rentals vs. Alta Equipment Group |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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