Correlation Between PT Global and UNITED RENTALS

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

By analyzing existing cross correlation between PT Global Mediacom and UNITED RENTALS, you can compare the effects of market volatilities on PT Global and UNITED RENTALS 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 PT Global with a short position of UNITED RENTALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Global and UNITED RENTALS.

Diversification Opportunities for PT Global and UNITED RENTALS

-0.55

Correlation Coefficient

PT Global  UNITED RENTALS

Excellent diversification

The 3 months correlation between 06L and UNITED is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding PT Global Mediacom and UNITED RENTALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED RENTALS and PT Global 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 PT Global Mediacom are associated (or correlated) with UNITED RENTALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED RENTALS has no effect on the direction of PT Global i.e., PT Global and UNITED RENTALS go up and down completely randomly.

Pair Corralation between PT Global and UNITED RENTALS

Assuming the 90 days trading horizon PT Global Mediacom is expected to under-perform the UNITED RENTALS. In addition to that, PT Global is 1.25 times more volatile than UNITED RENTALS. It trades about -0.03 of its total potential returns per unit of risk. UNITED RENTALS is currently generating about 0.22 per unit of volatility. If you would invest  62,694  in UNITED RENTALS on September 5, 2024 and sell it today you would earn a total of  18,446  from holding UNITED RENTALS or generate 29.42% return on investment over 90 days.

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

PT Global Mediacom  vs.  UNITED RENTALS

PT Global Mediacom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Global Mediacom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PT Global is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

UNITED RENTALS

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UNITED RENTALS are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, UNITED RENTALS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Global and UNITED RENTALS

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

The idea behind PT Global Mediacom and UNITED RENTALS 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.