Correlation Between UNITED RENTALS and Addtech AB

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

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

Diversification Opportunities for UNITED RENTALS and Addtech AB

-0.16

Correlation Coefficient

UNITED RENTALS  Addtech AB

Good diversification

The 3 months correlation between UNITED and Addtech is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and Addtech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addtech AB 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 Addtech AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addtech AB has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and Addtech AB go up and down completely randomly.

Pair Corralation between UNITED RENTALS and Addtech AB

Assuming the 90 days trading horizon UNITED RENTALS is expected to generate 1.49 times less return on investment than Addtech AB. But when comparing it to its historical volatility, UNITED RENTALS is 1.0 times less risky than Addtech AB. It trades about 0.06 of its potential returns per unit of risk. Addtech AB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,698  in Addtech AB on October 9, 2024 and sell it today you would earn a total of  940.00  from holding Addtech AB or generate 55.36% 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.  Addtech AB

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 latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Addtech AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Addtech AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Addtech AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with UNITED RENTALS and Addtech AB

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

The idea behind UNITED RENTALS and Addtech AB 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.