Correlation Between UNITED RENTALS and PT Indo

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

By analyzing existing cross correlation between UNITED RENTALS and PT Indo Tambangraya, you can compare the effects of market volatilities on UNITED RENTALS and PT Indo 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 PT Indo. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED RENTALS and PT Indo.

Diversification Opportunities for UNITED RENTALS and PT Indo

0.24

Correlation Coefficient

UNITED RENTALS  PT Indo

Modest diversification

The 3 months correlation between UNITED and 3IB is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and PT Indo Tambangraya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indo Tambangraya 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 PT Indo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indo Tambangraya has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and PT Indo go up and down completely randomly.

Pair Corralation between UNITED RENTALS and PT Indo

Assuming the 90 days trading horizon UNITED RENTALS is expected to generate 0.71 times more return on investment than PT Indo. However, UNITED RENTALS is 1.42 times less risky than PT Indo. It trades about 0.23 of its potential returns per unit of risk. PT Indo Tambangraya is currently generating about -0.03 per unit of risk. If you would invest  69,080  in UNITED RENTALS on October 24, 2024 and sell it today you would earn a total of  5,180  from holding UNITED RENTALS or generate 7.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

UNITED RENTALS  vs.  PT Indo Tambangraya

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. In spite of rather sound basic indicators, UNITED RENTALS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

PT Indo Tambangraya

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indo Tambangraya are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PT Indo is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with UNITED RENTALS and PT Indo

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

The idea behind UNITED RENTALS and PT Indo Tambangraya 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.