Correlation Between Hitachi Construction and United Rentals
Can any of the company-specific risk be diversified away by investing in both Hitachi Construction 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 Hitachi Construction and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hitachi Construction Machinery and United Rentals, you can compare the effects of market volatilities on Hitachi Construction 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 Hitachi Construction with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi Construction and United Rentals.
Diversification Opportunities for Hitachi Construction and United Rentals
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hitachi and United is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Hitachi Construction 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 Hitachi Construction Machinery 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 Hitachi Construction i.e., Hitachi Construction and United Rentals go up and down completely randomly.
Pair Corralation between Hitachi Construction and United Rentals
Assuming the 90 days horizon Hitachi Construction is expected to generate 11.57 times less return on investment than United Rentals. But when comparing it to its historical volatility, Hitachi Construction Machinery is 1.24 times less risky than United Rentals. It trades about 0.01 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 33,460 in United Rentals on September 5, 2024 and sell it today you would earn a total of 47,420 from holding United Rentals or generate 141.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Hitachi Construction Machinery vs. United Rentals
Performance |
| Timeline |
| Hitachi Construction |
| United Rentals |
Hitachi Construction and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hitachi Construction and United Rentals
The main advantage of trading using opposite Hitachi Construction and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi Construction 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.| Hitachi Construction vs. Richardson Electronics | Hitachi Construction vs. STMICROELECTRONICS | Hitachi Construction vs. Burlington Stores | Hitachi Construction vs. National Retail Properties |
| United Rentals vs. AGRICULTBK HADR25 YC | United Rentals vs. NIPPON STEEL SPADR | United Rentals vs. Federal Agricultural Mortgage | United Rentals vs. Hitachi Construction Machinery |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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