Correlation Between Federal Agricultural and United Rentals
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural 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 Federal Agricultural and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Agricultural Mortgage and United Rentals, you can compare the effects of market volatilities on Federal Agricultural 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 Federal Agricultural with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and United Rentals.
Diversification Opportunities for Federal Agricultural and United Rentals
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federal and United is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Federal Agricultural 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 Federal Agricultural Mortgage 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 Federal Agricultural i.e., Federal Agricultural and United Rentals go up and down completely randomly.
Pair Corralation between Federal Agricultural and United Rentals
Assuming the 90 days horizon Federal Agricultural is expected to generate 1.46 times less return on investment than United Rentals. But when comparing it to its historical volatility, Federal Agricultural Mortgage is 1.25 times less risky than United Rentals. It trades about 0.14 of its potential returns per unit of risk. United Rentals is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 62,894 in United Rentals on September 5, 2024 and sell it today you would earn a total of 17,986 from holding United Rentals or generate 28.6% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.46% |
Values | Daily Returns |
Federal Agricultural Mortgage vs. United Rentals
Performance |
Timeline |
Federal Agricultural |
United Rentals |
Federal Agricultural and United Rentals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Federal Agricultural and United Rentals
The main advantage of trading using opposite Federal Agricultural and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural 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.Federal Agricultural vs. Visa Inc | Federal Agricultural vs. American Express | Federal Agricultural vs. ORIX Corporation |
United Rentals vs. AGRICULTBK HADR25 YC | United Rentals vs. NIPPON STEEL SPADR | United Rentals vs. Federal Agricultural Mortgage | United Rentals vs. Hitachi Construction Machinery |
Check out your portfolio center.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
Content Syndication Quickly integrate customizable finance content to your own investment portal | |
Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |