Correlation Between United Rentals and New Oriental

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

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

Diversification Opportunities for United Rentals and New Oriental

-0.08

Correlation Coefficient

United Rentals  New Oriental

Good diversification

The 3 months correlation between United and New is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education 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 New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of United Rentals i.e., United Rentals and New Oriental go up and down completely randomly.

Pair Corralation between United Rentals and New Oriental

Assuming the 90 days trading horizon United Rentals is expected to under-perform the New Oriental. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 1.43 times less risky than New Oriental. The stock trades about -0.1 of its potential returns per unit of risk. The New Oriental Education is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,300  in New Oriental Education on September 12, 2024 and sell it today you would earn a total of  250.00  from holding New Oriental Education or generate 10.87% return on investment over 90 days.

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

United Rentals  vs.  New Oriental Education

United Rentals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 10 (%) 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.

New Oriental Education

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Oriental Education are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, New Oriental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United Rentals and New Oriental

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

The idea behind United Rentals and New Oriental Education 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.