Correlation Between China Communications and United Rentals
Can any of the company-specific risk be diversified away by investing in both China 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 China 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 China Communications Services and United Rentals, you can compare the effects of market volatilities on China 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 China Communications with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and United Rentals.
Diversification Opportunities for China Communications and United Rentals
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and United is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and China 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 China Communications Services 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 China Communications i.e., China Communications and United Rentals go up and down completely randomly.
Pair Corralation between China Communications and United Rentals
Assuming the 90 days horizon China Communications Services is expected to under-perform the United Rentals. But the stock apears to be less risky and, when comparing its historical volatility, China Communications Services is 1.61 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 0.25 of returns per unit of risk over similar time horizon. If you would invest 67,200 in United Rentals on November 3, 2024 and sell it today you would earn a total of 8,080 from holding United Rentals or generate 12.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Communications Services vs. United Rentals
Performance |
| Timeline |
| China Communications |
| United Rentals |
China Communications and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and United Rentals
The main advantage of trading using opposite China Communications and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China 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' long position.| China Communications vs. T Mobile | China Communications vs. China Mobile Limited | China Communications vs. Verizon Communications | China Communications vs. ATT Inc |
| United Rentals vs. OPKO HEALTH | United Rentals vs. Sims Metal Management | United Rentals vs. Tencent Music Entertainment | United Rentals vs. Molina Healthcare |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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