Correlation Between United Rentals and Dongil Steel

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

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

Diversification Opportunities for United Rentals and Dongil Steel

-0.23

Correlation Coefficient

United Rentals  Dongil Steel

Very good diversification

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

Pair Corralation between United Rentals and Dongil Steel

Considering the 90-day investment horizon United Rentals is expected to generate 1.27 times more return on investment than Dongil Steel. However, United Rentals is 1.27 times more volatile than Dongil Steel Co. It trades about 0.08 of its potential returns per unit of risk. Dongil Steel Co is currently generating about -0.17 per unit of risk. If you would invest  72,810  in United Rentals on September 13, 2024 and sell it today you would earn a total of  6,887  from holding United Rentals or generate 9.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.06%
Values	Daily Returns

United Rentals  vs.  Dongil Steel Co

United Rentals

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, United Rentals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dongil Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongil Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat 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.

Pair Trading with United Rentals and Dongil Steel

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

The idea behind United Rentals and Dongil Steel Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.