Correlation Between United Rentals and Aluminumof China
Can any of the company-specific risk be diversified away by investing in both United Rentals and Aluminumof China 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 United Rentals and Aluminumof China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Aluminum of, you can compare the effects of market volatilities on United Rentals and Aluminumof China 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 United Rentals with a short position of Aluminumof China. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Aluminumof China.
Diversification Opportunities for United Rentals and Aluminumof China
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Aluminumof is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminumof China and United Rentals 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 United Rentals are associated (or correlated) with Aluminumof China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminumof China has no effect on the direction of United Rentals i.e., United Rentals and Aluminumof China go up and down completely randomly.
Pair Corralation between United Rentals and Aluminumof China
Assuming the 90 days horizon United Rentals is expected to generate 0.63 times more return on investment than Aluminumof China. However, United Rentals is 1.59 times less risky than Aluminumof China. It trades about 0.05 of its potential returns per unit of risk. Aluminum of is currently generating about -0.08 per unit of risk. If you would invest 75,010 in United Rentals on August 25, 2024 and sell it today you would earn a total of 2,270 from holding United Rentals or generate 3.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Rentals vs. Aluminum of
Performance |
| Timeline |
| United Rentals |
| Aluminumof China |
United Rentals and Aluminumof China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and Aluminumof China
The main advantage of trading using opposite United Rentals and Aluminumof China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Aluminumof China 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 Aluminumof China will offset losses from the drop in Aluminumof China's long position.| United Rentals vs. Chuangs China Investments | United Rentals vs. KINGBOARD CHEMICAL | United Rentals vs. Gladstone Investment | United Rentals vs. China BlueChemical |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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