Correlation Between United Rentals and CM Hospitalar

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

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

Diversification Opportunities for United Rentals and CM Hospitalar

0.24

Correlation Coefficient

United Rentals  CM Hospitalar

Modest diversification

The 3 months correlation between United and VVEO3 is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and CM Hospitalar SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CM Hospitalar SA 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 CM Hospitalar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CM Hospitalar SA has no effect on the direction of United Rentals i.e., United Rentals and CM Hospitalar go up and down completely randomly.

Pair Corralation between United Rentals and CM Hospitalar

Assuming the 90 days trading horizon United Rentals is expected to generate 4.26 times less return on investment than CM Hospitalar. But when comparing it to its historical volatility, United Rentals is 1.12 times less risky than CM Hospitalar. It trades about 0.02 of its potential returns per unit of risk. CM Hospitalar SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  179.00  in CM Hospitalar SA on October 1, 2024 and sell it today you would earn a total of  33.00  from holding CM Hospitalar SA or generate 18.44% return on investment over 90 days.

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

United Rentals  vs.  CM Hospitalar SA

United Rentals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, United Rentals is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

CM Hospitalar SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CM Hospitalar SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CM Hospitalar unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and CM Hospitalar

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

The idea behind United Rentals and CM Hospitalar SA 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.