Correlation Between GOLD ROAD and UNITED RENTALS

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

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

Diversification Opportunities for GOLD ROAD and UNITED RENTALS

0.26

Correlation Coefficient

GOLD ROAD  UNITED RENTALS

Modest diversification

The 3 months correlation between GOLD and UNITED is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding GOLD ROAD RES and UNITED RENTALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED RENTALS and GOLD ROAD 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 GOLD ROAD RES 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 GOLD ROAD i.e., GOLD ROAD and UNITED RENTALS go up and down completely randomly.

Pair Corralation between GOLD ROAD and UNITED RENTALS

Assuming the 90 days trading horizon GOLD ROAD RES is expected to generate 1.82 times more return on investment than UNITED RENTALS. However, GOLD ROAD is 1.82 times more volatile than UNITED RENTALS. It trades about 0.09 of its potential returns per unit of risk. UNITED RENTALS is currently generating about -0.42 per unit of risk. If you would invest  115.00  in GOLD ROAD RES on September 23, 2024 and sell it today you would earn a total of  6.00  from holding GOLD ROAD RES or generate 5.22% return on investment over 90 days.

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

GOLD ROAD RES  vs.  UNITED RENTALS

GOLD ROAD RES

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GOLD ROAD RES are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, GOLD ROAD exhibited solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of rather sound basic indicators, UNITED RENTALS is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GOLD ROAD and UNITED RENTALS

The main advantage of trading using opposite GOLD ROAD and UNITED RENTALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOLD ROAD 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's long position.

The idea behind GOLD ROAD RES 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..