Correlation Between Daito Trust and United Rentals

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

By analyzing existing cross correlation between Daito Trust Construction and United Rentals, you can compare the effects of market volatilities on Daito Trust 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 Daito Trust with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daito Trust and United Rentals.

Diversification Opportunities for Daito Trust and United Rentals

-0.41

Correlation Coefficient

Daito Trust  United Rentals

Very good diversification

The 3 months correlation between Daito and United is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Daito Trust 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 Daito Trust Construction 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 Daito Trust i.e., Daito Trust and United Rentals go up and down completely randomly.

Pair Corralation between Daito Trust and United Rentals

Assuming the 90 days horizon Daito Trust is expected to generate 12.64 times less return on investment than United Rentals. But when comparing it to its historical volatility, Daito Trust Construction is 2.06 times less risky than United Rentals. It trades about 0.02 of its potential returns per unit of risk. United Rentals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  65,189  in United Rentals on September 14, 2024 and sell it today you would earn a total of  11,231  from holding United Rentals or generate 17.23% return on investment over 90 days.

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

Daito Trust Construction  vs.  United Rentals

Daito Trust Construction

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daito Trust Construction are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Daito Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

United Rentals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 8 (%) 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.

Pair Trading with Daito Trust and United Rentals

The main advantage of trading using opposite Daito Trust and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daito Trust 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' long position.

The idea behind Daito Trust Construction 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.