Correlation Between Commonwealth Bank and United Rentals
Can any of the company-specific risk be diversified away by investing in both Commonwealth Bank 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 Commonwealth Bank and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Bank of and United Rentals, you can compare the effects of market volatilities on Commonwealth Bank 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 Commonwealth Bank with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Bank and United Rentals.
Diversification Opportunities for Commonwealth Bank and United Rentals
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Commonwealth and United is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Commonwealth Bank 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 Commonwealth Bank of 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 Commonwealth Bank i.e., Commonwealth Bank and United Rentals go up and down completely randomly.
Pair Corralation between Commonwealth Bank and United Rentals
Assuming the 90 days horizon Commonwealth Bank is expected to generate 1.87 times less return on investment than United Rentals. But when comparing it to its historical volatility, Commonwealth Bank of is 1.9 times less risky than United Rentals. It trades about 0.08 of its potential returns per unit of risk. United Rentals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 34,821 in United Rentals on August 31, 2024 and sell it today you would earn a total of 47,079 from holding United Rentals or generate 135.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Bank of vs. United Rentals
Performance |
| Timeline |
| Commonwealth Bank |
| United Rentals |
Commonwealth Bank and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Bank and United Rentals
The main advantage of trading using opposite Commonwealth Bank and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank 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.| Commonwealth Bank vs. Bank of China | Commonwealth Bank vs. Superior Plus Corp | Commonwealth Bank vs. NMI Holdings | Commonwealth Bank vs. Origin Agritech |
| United Rentals vs. FUYO GENERAL LEASE | United Rentals vs. Sumitomo Chemical | United Rentals vs. TIANDE CHEMICAL | United Rentals vs. Sanyo Chemical Industries |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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