Correlation Between United Rentals and Varta AG

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Can any of the company-specific risk be diversified away by investing in both United Rentals and Varta AG 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 Varta AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Varta AG, you can compare the effects of market volatilities on United Rentals and Varta AG 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 Varta AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Varta AG.

Diversification Opportunities for United Rentals and Varta AG

0.45
  Correlation Coefficient

Very weak diversification

The 3 months correlation between United and Varta is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Varta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varta 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 Varta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varta AG has no effect on the direction of United Rentals i.e., United Rentals and Varta AG go up and down completely randomly.

Pair Corralation between United Rentals and Varta AG

Considering the 90-day investment horizon United Rentals is expected to generate 0.28 times more return on investment than Varta AG. However, United Rentals is 3.6 times less risky than Varta AG. It trades about 0.09 of its potential returns per unit of risk. Varta AG is currently generating about -0.02 per unit of risk. If you would invest  34,927  in United Rentals on September 5, 2024 and sell it today you would earn a total of  51,975  from holding United Rentals or generate 148.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.21%
ValuesDaily Returns

United Rentals  vs.  Varta AG

 Performance 
       Timeline  
United Rentals 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, United Rentals demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Varta AG 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Varta AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Varta AG exhibited solid returns over the last few months and may actually be approaching a breakup point.

United Rentals and Varta AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Rentals and Varta AG

The main advantage of trading using opposite United Rentals and Varta AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Varta AG 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 Varta AG will offset losses from the drop in Varta AG's long position.
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The idea behind United Rentals and Varta AG 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.
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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