Correlation Between Metalrgica Riosulense and United Rentals

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

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

Diversification Opportunities for Metalrgica Riosulense and United Rentals

0.27

Correlation Coefficient

Metalrgica Riosulense  United Rentals

Modest diversification

The 3 months correlation between Metalrgica and United is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Metalrgica Riosulense SA and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Metalrgica Riosulense 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 Metalrgica Riosulense 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 Metalrgica Riosulense i.e., Metalrgica Riosulense and United Rentals go up and down completely randomly.

Pair Corralation between Metalrgica Riosulense and United Rentals

Assuming the 90 days trading horizon Metalrgica Riosulense is expected to generate 25.58 times less return on investment than United Rentals. But when comparing it to its historical volatility, Metalrgica Riosulense SA is 7.54 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 of returns per unit of risk over similar time horizon. If you would invest  15,536  in United Rentals on October 20, 2024 and sell it today you would earn a total of  1,200  from holding United Rentals or generate 7.72% return on investment over 90 days.

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

Metalrgica Riosulense SA  vs.  United Rentals

Metalrgica Riosulense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metalrgica Riosulense SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred 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

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, United Rentals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metalrgica Riosulense and United Rentals

The main advantage of trading using opposite Metalrgica Riosulense and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metalrgica Riosulense 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 Metalrgica Riosulense 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.