Correlation Between Movida Participaes and United Rentals

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

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

Diversification Opportunities for Movida Participaes and United Rentals

-0.51

Correlation Coefficient

Movida Participaes  United Rentals

Excellent diversification

The 3 months correlation between Movida and United is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Movida Participaes SA and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Movida Participaes 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 Movida Participaes SA 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 Movida Participaes i.e., Movida Participaes and United Rentals go up and down completely randomly.

Pair Corralation between Movida Participaes and United Rentals

Assuming the 90 days trading horizon Movida Participaes SA is expected to under-perform the United Rentals. In addition to that, Movida Participaes is 1.6 times more volatile than United Rentals. It trades about -0.02 of its total potential returns per unit of risk. United Rentals is currently generating about 0.16 per unit of volatility. If you would invest  11,898  in United Rentals on August 30, 2024 and sell it today you would earn a total of  6,792  from holding United Rentals or generate 57.09% return on investment over 90 days.

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

Movida Participaes SA  vs.  United Rentals

Movida Participaes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Movida Participaes SA 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

United Rentals

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, United Rentals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Movida Participaes and United Rentals

The main advantage of trading using opposite Movida Participaes and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Movida Participaes 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 Movida Participaes SA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.