Correlation Between United Rentals and PT Hexindo

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

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

Diversification Opportunities for United Rentals and PT Hexindo

-0.8

Correlation Coefficient

United Rentals  PT Hexindo

Pay attention - limited upside

The 3 months correlation between United and HX1A is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and PT Hexindo Adiperkasa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Hexindo Adiperkasa 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 PT Hexindo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Hexindo Adiperkasa has no effect on the direction of United Rentals i.e., United Rentals and PT Hexindo go up and down completely randomly.

Pair Corralation between United Rentals and PT Hexindo

Assuming the 90 days horizon United Rentals is expected to generate 0.63 times more return on investment than PT Hexindo. However, United Rentals is 1.58 times less risky than PT Hexindo. It trades about 0.14 of its potential returns per unit of risk. PT Hexindo Adiperkasa is currently generating about -0.08 per unit of risk. If you would invest  66,447  in United Rentals on August 31, 2024 and sell it today you would earn a total of  15,453  from holding United Rentals or generate 23.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

United Rentals  vs.  PT Hexindo Adiperkasa

United Rentals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Rentals reported solid returns over the last few months and may actually be approaching a breakup point.

PT Hexindo Adiperkasa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Hexindo Adiperkasa 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 December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with United Rentals and PT Hexindo

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

The idea behind United Rentals and PT Hexindo Adiperkasa 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.