Correlation Between ECHO INVESTMENT and UNITED RENTALS

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

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

Diversification Opportunities for ECHO INVESTMENT and UNITED RENTALS

0.54

Correlation Coefficient

ECHO INVESTMENT  UNITED RENTALS

Very weak diversification

The 3 months correlation between ECHO and UNITED is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding ECHO INVESTMENT ZY and UNITED RENTALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED RENTALS and ECHO INVESTMENT 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 ECHO INVESTMENT ZY 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 ECHO INVESTMENT i.e., ECHO INVESTMENT and UNITED RENTALS go up and down completely randomly.

Pair Corralation between ECHO INVESTMENT and UNITED RENTALS

Assuming the 90 days horizon ECHO INVESTMENT ZY is expected to generate 0.73 times more return on investment than UNITED RENTALS. However, ECHO INVESTMENT ZY is 1.37 times less risky than UNITED RENTALS. It trades about -0.03 of its potential returns per unit of risk. UNITED RENTALS is currently generating about -0.09 per unit of risk. If you would invest  106.00  in ECHO INVESTMENT ZY on December 28, 2024 and sell it today you would lose (4.00) from holding ECHO INVESTMENT ZY or give up 3.77% of portfolio value over 90 days.

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

ECHO INVESTMENT ZY  vs.  UNITED RENTALS

ECHO INVESTMENT ZY

Risk-Adjusted Performance

Very Weak

Over the last 90 days ECHO INVESTMENT ZY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ECHO INVESTMENT 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

Very Weak

Over the last 90 days UNITED RENTALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with ECHO INVESTMENT and UNITED RENTALS

The main advantage of trading using opposite ECHO INVESTMENT and UNITED RENTALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECHO INVESTMENT 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 ECHO INVESTMENT ZY 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.