Correlation Between United Rentals and Kao
Can any of the company-specific risk be diversified away by investing in both United Rentals and Kao 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 Kao into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Kao Corporation, you can compare the effects of market volatilities on United Rentals and Kao 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 Kao. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Kao.
Diversification Opportunities for United Rentals and Kao
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between United and Kao is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Kao Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kao Corporation 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 Kao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kao Corporation has no effect on the direction of United Rentals i.e., United Rentals and Kao go up and down completely randomly.
Pair Corralation between United Rentals and Kao
Considering the 90-day investment horizon United Rentals is expected to generate 1.08 times more return on investment than Kao. However, United Rentals is 1.08 times more volatile than Kao Corporation. It trades about 0.11 of its potential returns per unit of risk. Kao Corporation is currently generating about 0.03 per unit of risk. If you would invest 44,333 in United Rentals on September 4, 2024 and sell it today you would earn a total of 41,372 from holding United Rentals or generate 93.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 92.41% |
| Values | Daily Returns |
United Rentals vs. Kao Corp.
Performance |
| Timeline |
| United Rentals |
| Kao Corporation |
United Rentals and Kao Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and Kao
The main advantage of trading using opposite United Rentals and Kao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Kao 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 Kao will offset losses from the drop in Kao'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 |
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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