Correlation Between NTT DATA and United Rentals
Can any of the company-specific risk be diversified away by investing in both NTT DATA 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 NTT DATA and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NTT DATA and United Rentals, you can compare the effects of market volatilities on NTT DATA 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 NTT DATA with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of NTT DATA and United Rentals.
Diversification Opportunities for NTT DATA and United Rentals
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between NTT and United is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding NTT DATA and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and NTT DATA 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 NTT DATA 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 NTT DATA i.e., NTT DATA and United Rentals go up and down completely randomly.
Pair Corralation between NTT DATA and United Rentals
Assuming the 90 days trading horizon NTT DATA is expected to under-perform the United Rentals. But the stock apears to be less risky and, when comparing its historical volatility, NTT DATA is 1.05 times less risky than United Rentals. The stock trades about -0.07 of its potential returns per unit of risk. The United Rentals is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 70,320 in United Rentals on October 24, 2024 and sell it today you would earn a total of 5,220 from holding United Rentals or generate 7.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NTT DATA vs. United Rentals
Performance |
| Timeline |
| NTT DATA |
| United Rentals |
NTT DATA and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NTT DATA and United Rentals
The main advantage of trading using opposite NTT DATA and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NTT DATA 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.The idea behind NTT DATA and United Rentals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| United Rentals vs. DAIDO METAL TD | United Rentals vs. Datadog | United Rentals vs. Northern Data AG | United Rentals vs. SIERRA METALS |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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