Correlation Between United Rentals and IFAN Financial

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

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

Diversification Opportunities for United Rentals and IFAN Financial

0.04

Correlation Coefficient

United Rentals  IFAN Financial

Significant diversification

The 3 months correlation between United and IFAN is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and IFAN Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IFAN Financial 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 IFAN Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IFAN Financial has no effect on the direction of United Rentals i.e., United Rentals and IFAN Financial go up and down completely randomly.

Pair Corralation between United Rentals and IFAN Financial

Considering the 90-day investment horizon United Rentals is expected to generate 34.86 times less return on investment than IFAN Financial. But when comparing it to its historical volatility, United Rentals is 37.42 times less risky than IFAN Financial. It trades about 0.19 of its potential returns per unit of risk. IFAN Financial is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.01  in IFAN Financial on September 5, 2024 and sell it today you would earn a total of  0.02  from holding IFAN Financial or generate 200.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

United Rentals  vs.  IFAN Financial

United Rentals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, United Rentals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

IFAN Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IFAN Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, IFAN Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and IFAN Financial

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

The idea behind United Rentals and IFAN Financial 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.