Correlation Between Microsoft and United Rentals
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and United Rentals, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and United Rentals.
Diversification Opportunities for Microsoft and United Rentals
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and United is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and United Rentals go up and down completely randomly.
Pair Corralation between Microsoft and United Rentals
Given the investment horizon of 90 days Microsoft is expected to generate 2.49 times less return on investment than United Rentals. But when comparing it to its historical volatility, Microsoft is 1.88 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 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,935 in United Rentals on August 24, 2024 and sell it today you would earn a total of 10,551 from holding United Rentals or generate 152.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.76% |
| Values | Daily Returns |
Microsoft vs. United Rentals
Performance |
| Timeline |
| Microsoft |
| United Rentals |
Microsoft and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and United Rentals
The main advantage of trading using opposite Microsoft and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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