Correlation Between Localiza Rent and U-Haul Holding

Can any of the company-specific risk be diversified away by investing in both Localiza Rent and U-Haul Holding 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 Localiza Rent and U-Haul Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Localiza Rent A and U Haul Holding, you can compare the effects of market volatilities on Localiza Rent and U-Haul Holding 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 Localiza Rent with a short position of U-Haul Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Localiza Rent and U-Haul Holding.

Diversification Opportunities for Localiza Rent and U-Haul Holding

0.23

Correlation Coefficient

Localiza Rent  U-Haul Holding

Modest diversification

The 3 months correlation between Localiza and U-Haul is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Localiza Rent A and U Haul Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Haul Holding and Localiza Rent 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 Localiza Rent A are associated (or correlated) with U-Haul Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Haul Holding has no effect on the direction of Localiza Rent i.e., Localiza Rent and U-Haul Holding go up and down completely randomly.

Pair Corralation between Localiza Rent and U-Haul Holding

Assuming the 90 days horizon Localiza Rent A is expected to under-perform the U-Haul Holding. In addition to that, Localiza Rent is 2.3 times more volatile than U Haul Holding. It trades about -0.07 of its total potential returns per unit of risk. U Haul Holding is currently generating about -0.05 per unit of volatility. If you would invest  6,764  in U Haul Holding on September 4, 2024 and sell it today you would lose (403.00) from holding U Haul Holding or give up 5.96% of portfolio value over 90 days.

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

Localiza Rent A  vs.  U Haul Holding

Localiza Rent A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Localiza Rent A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

U Haul Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days U Haul Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, U-Haul Holding is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Localiza Rent and U-Haul Holding

The main advantage of trading using opposite Localiza Rent and U-Haul Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Localiza Rent position performs unexpectedly, U-Haul Holding 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 U-Haul Holding will offset losses from the drop in U-Haul Holding's long position.

The idea behind Localiza Rent A and U Haul Holding 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.