Correlation Between AGRICULTBK HADR/25 and United Rentals

Can any of the company-specific risk be diversified away by investing in both AGRICULTBK HADR/25 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 AGRICULTBK HADR/25 and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AGRICULTBK HADR25 YC and United Rentals, you can compare the effects of market volatilities on AGRICULTBK HADR/25 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 AGRICULTBK HADR/25 with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGRICULTBK HADR/25 and United Rentals.

Diversification Opportunities for AGRICULTBK HADR/25 and United Rentals

0.87

Correlation Coefficient

AGRICULTBK HADR/25  United Rentals

Very poor diversification

The 3 months correlation between AGRICULTBK and United is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding AGRICULTBK HADR25 YC and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and AGRICULTBK HADR/25 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 AGRICULTBK HADR25 YC 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 AGRICULTBK HADR/25 i.e., AGRICULTBK HADR/25 and United Rentals go up and down completely randomly.

Pair Corralation between AGRICULTBK HADR/25 and United Rentals

Assuming the 90 days trading horizon AGRICULTBK HADR/25 is expected to generate 1.25 times less return on investment than United Rentals. But when comparing it to its historical volatility, AGRICULTBK HADR25 YC is 1.16 times less risky than United Rentals. It trades about 0.16 of its potential returns per unit of risk. United Rentals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  62,435  in United Rentals on September 10, 2024 and sell it today you would earn a total of  18,905  from holding United Rentals or generate 30.28% return on investment over 90 days.

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

AGRICULTBK HADR25 YC  vs.  United Rentals

AGRICULTBK HADR/25

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AGRICULTBK HADR25 YC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AGRICULTBK HADR/25 reported solid returns over the last few months and may actually be approaching a breakup point.

United Rentals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 13 (%) 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 AGRICULTBK HADR/25 and United Rentals

The main advantage of trading using opposite AGRICULTBK HADR/25 and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGRICULTBK HADR/25 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 AGRICULTBK HADR25 YC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.