Correlation Between United Rentals and Banco Santander

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

By analyzing existing cross correlation between United Rentals and Banco Santander Chile, you can compare the effects of market volatilities on United Rentals and Banco Santander 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 Banco Santander. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Banco Santander.

Diversification Opportunities for United Rentals and Banco Santander

0.19

Correlation Coefficient

United Rentals  Banco Santander

Average diversification

The 3 months correlation between United and Banco is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Banco Santander Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander Chile 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 Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander Chile has no effect on the direction of United Rentals i.e., United Rentals and Banco Santander go up and down completely randomly.

Pair Corralation between United Rentals and Banco Santander

Assuming the 90 days trading horizon United Rentals is expected to generate 1.68 times more return on investment than Banco Santander. However, United Rentals is 1.68 times more volatile than Banco Santander Chile. It trades about 0.07 of its potential returns per unit of risk. Banco Santander Chile is currently generating about 0.06 per unit of risk. If you would invest  6,991  in United Rentals on October 11, 2024 and sell it today you would earn a total of  7,657  from holding United Rentals or generate 109.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

United Rentals  vs.  Banco Santander Chile

United Rentals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Rentals has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Banco Santander Chile

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Banco Santander Chile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Banco Santander is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Rentals and Banco Santander

The main advantage of trading using opposite United Rentals and Banco Santander positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Banco Santander 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 Banco Santander will offset losses from the drop in Banco Santander's long position.

The idea behind United Rentals and Banco Santander Chile 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.