Correlation Between Hewlett Packard and United Rentals
Can any of the company-specific risk be diversified away by investing in both Hewlett Packard 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 Hewlett Packard and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hewlett Packard Co and United Rentals, you can compare the effects of market volatilities on Hewlett Packard 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 Hewlett Packard with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hewlett Packard and United Rentals.
Diversification Opportunities for Hewlett Packard and United Rentals
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hewlett and United is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Co and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Hewlett Packard 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 Hewlett Packard Co 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 Hewlett Packard i.e., Hewlett Packard and United Rentals go up and down completely randomly.
Pair Corralation between Hewlett Packard and United Rentals
Assuming the 90 days trading horizon Hewlett Packard is expected to generate 2.1 times less return on investment than United Rentals. But when comparing it to its historical volatility, Hewlett Packard Co is 1.5 times less risky than United Rentals. It trades about 0.06 of its potential returns per unit of risk. United Rentals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 6,982 in United Rentals on August 26, 2024 and sell it today you would earn a total of 10,504 from holding United Rentals or generate 150.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Hewlett Packard Co vs. United Rentals
Performance |
| Timeline |
| Hewlett Packard |
| United Rentals |
Hewlett Packard and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hewlett Packard and United Rentals
The main advantage of trading using opposite Hewlett Packard and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hewlett Packard 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.| Hewlett Packard vs. BTG Pactual Logstica | Hewlett Packard vs. Plano Plano Desenvolvimento | Hewlett Packard vs. Cable One | Hewlett Packard vs. ATMA Participaes SA |
| United Rentals vs. Localiza Rent a | United Rentals vs. Movida Participaes SA | United Rentals vs. Fras le SA | United Rentals vs. Clave Indices De |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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