Correlation Between Data#3 and United Rentals

Can any of the company-specific risk be diversified away by investing in both Data#3 and United Rentals 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 Data#3 and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Data3 Limited and United Rentals, you can compare the effects of market volatilities on Data#3 and United Rentals 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 Data#3 with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Data#3 and United Rentals.

Diversification Opportunities for Data#3 and United Rentals

0.49

Correlation Coefficient

Data#3  United Rentals

Very weak diversification

The 3 months correlation between Data#3 and United is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Data3 Limited and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Data#3 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 Data3 Limited are associated (or correlated) with United Rentals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals has no effect on the direction of Data#3 i.e., Data#3 and United Rentals go up and down completely randomly.

Pair Corralation between Data#3 and United Rentals

Assuming the 90 days horizon Data#3 is expected to generate 6.53 times less return on investment than United Rentals. But when comparing it to its historical volatility, Data3 Limited is 1.0 times less risky than United Rentals. It trades about 0.01 of its potential returns per unit of risk. United Rentals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  32,183  in United Rentals on September 22, 2024 and sell it today you would earn a total of  36,637  from holding United Rentals or generate 113.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Data3 Limited  vs.  United Rentals

Data3 Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Data3 Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

United Rentals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, United Rentals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Data#3 and United Rentals

The main advantage of trading using opposite Data#3 and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Data#3 position performs unexpectedly, United Rentals 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 United Rentals will offset losses from the drop in United Rentals' long position.

The idea behind Data3 Limited and United Rentals 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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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.