Correlation Between DOCDATA and United Rentals

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

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

Diversification Opportunities for DOCDATA and United Rentals

-0.39

Correlation Coefficient

DOCDATA  United Rentals

Very good diversification

The 3 months correlation between DOCDATA and United is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding DOCDATA and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and DOCDATA 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 DOCDATA 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 DOCDATA i.e., DOCDATA and United Rentals go up and down completely randomly.

Pair Corralation between DOCDATA and United Rentals

Assuming the 90 days trading horizon DOCDATA is expected to under-perform the United Rentals. In addition to that, DOCDATA is 1.96 times more volatile than United Rentals. It trades about -0.03 of its total potential returns per unit of risk. United Rentals is currently generating about 0.07 per unit of volatility. 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

DOCDATA  vs.  United Rentals

DOCDATA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOCDATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 DOCDATA and United Rentals

The main advantage of trading using opposite DOCDATA and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOCDATA 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 DOCDATA 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.