Correlation Between United Rentals and Infosys

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

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

Diversification Opportunities for United Rentals and Infosys

-0.29

Correlation Coefficient

United Rentals  Infosys

Very good diversification

The 3 months correlation between United and Infosys is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Infosys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Limited 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 Infosys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infosys Limited has no effect on the direction of United Rentals i.e., United Rentals and Infosys go up and down completely randomly.

Pair Corralation between United Rentals and Infosys

Assuming the 90 days trading horizon United Rentals is expected to generate 4.18 times more return on investment than Infosys. However, United Rentals is 4.18 times more volatile than Infosys Limited. It trades about 0.08 of its potential returns per unit of risk. Infosys Limited is currently generating about -0.35 per unit of risk. If you would invest  15,888  in United Rentals on October 23, 2024 and sell it today you would earn a total of  822.00  from holding United Rentals or generate 5.17% 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.  Infosys Limited

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Infosys Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Infosys Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Infosys may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with United Rentals and Infosys

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

The idea behind United Rentals and Infosys Limited 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.