Correlation Between United Rentals and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both United Rentals and Rheinmetall 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 Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Rheinmetall AG, you can compare the effects of market volatilities on United Rentals and Rheinmetall 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 Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Rheinmetall.
Diversification Opportunities for United Rentals and Rheinmetall
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Rheinmetall is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG 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 Rheinmetall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rheinmetall AG has no effect on the direction of United Rentals i.e., United Rentals and Rheinmetall go up and down completely randomly.
Pair Corralation between United Rentals and Rheinmetall
Considering the 90-day investment horizon United Rentals is expected to generate 0.79 times more return on investment than Rheinmetall. However, United Rentals is 1.26 times less risky than Rheinmetall. It trades about 0.1 of its potential returns per unit of risk. Rheinmetall AG is currently generating about 0.08 per unit of risk. If you would invest 61,363 in United Rentals on September 12, 2024 and sell it today you would earn a total of 18,239 from holding United Rentals or generate 29.72% 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. Rheinmetall AG
Performance |
| Timeline |
| United Rentals |
| Rheinmetall AG |
United Rentals and Rheinmetall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and Rheinmetall
The main advantage of trading using opposite United Rentals and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Rheinmetall 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 Rheinmetall will offset losses from the drop in Rheinmetall'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 |
| Rheinmetall vs. Lockheed Martin | Rheinmetall vs. BAE Systems PLC | Rheinmetall vs. Qinetiq Group PLC | Rheinmetall vs. Leonardo SpA ADR |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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