Correlation Between United Rentals and Kensington Dynamic
Can any of the company-specific risk be diversified away by investing in both United Rentals and Kensington Dynamic 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 Kensington Dynamic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Kensington Dynamic Growth, you can compare the effects of market volatilities on United Rentals and Kensington Dynamic 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 Kensington Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Kensington Dynamic.
Diversification Opportunities for United Rentals and Kensington Dynamic
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Kensington is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Kensington Dynamic Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kensington Dynamic Growth 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 Kensington Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kensington Dynamic Growth has no effect on the direction of United Rentals i.e., United Rentals and Kensington Dynamic go up and down completely randomly.
Pair Corralation between United Rentals and Kensington Dynamic
Considering the 90-day investment horizon United Rentals is expected to generate 3.1 times more return on investment than Kensington Dynamic. However, United Rentals is 3.1 times more volatile than Kensington Dynamic Growth. It trades about 0.17 of its potential returns per unit of risk. Kensington Dynamic Growth is currently generating about 0.34 per unit of risk. If you would invest 78,451 in United Rentals on September 4, 2024 and sell it today you would earn a total of 7,254 from holding United Rentals or generate 9.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Rentals vs. Kensington Dynamic Growth
Performance |
| Timeline |
| United Rentals |
| Kensington Dynamic Growth |
United Rentals and Kensington Dynamic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and Kensington Dynamic
The main advantage of trading using opposite United Rentals and Kensington Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Kensington Dynamic 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 Kensington Dynamic will offset losses from the drop in Kensington Dynamic's long position.| United Rentals vs. HE Equipment Services | United Rentals vs. GATX Corporation | United Rentals vs. McGrath RentCorp | United Rentals vs. Alta Equipment Group |
| Kensington Dynamic vs. Kensington Defender Institutional | Kensington Dynamic vs. Kensington Active Advantage | Kensington Dynamic vs. Pimco Global Multi Asset | Kensington Dynamic vs. Acclivity Small Cap |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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