Correlation Between United Rentals and Automatic Data
Can any of the company-specific risk be diversified away by investing in both United Rentals and Automatic Data 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 United Rentals and Automatic Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Automatic Data Processing, you can compare the effects of market volatilities on United Rentals and Automatic Data 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 United Rentals with a short position of Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Automatic Data.
Diversification Opportunities for United Rentals and Automatic Data
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Automatic is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing and United Rentals 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 United Rentals are associated (or correlated) with Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of United Rentals i.e., United Rentals and Automatic Data go up and down completely randomly.
Pair Corralation between United Rentals and Automatic Data
Assuming the 90 days trading horizon United Rentals is expected to generate 1.71 times more return on investment than Automatic Data. However, United Rentals is 1.71 times more volatile than Automatic Data Processing. It trades about 0.12 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.15 per unit of risk. If you would invest 14,304 in United Rentals on September 12, 2024 and sell it today you would earn a total of 2,730 from holding United Rentals or generate 19.09% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 98.41% |
Values | Daily Returns |
United Rentals vs. Automatic Data Processing
Performance |
Timeline |
United Rentals |
Automatic Data Processing |
United Rentals and Automatic Data Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United Rentals and Automatic Data
The main advantage of trading using opposite United Rentals and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.United Rentals vs. Localiza Rent a | United Rentals vs. Movida Participaes SA | United Rentals vs. Fundo Investimento Imobiliario | United Rentals vs. LESTE FDO INV |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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