Correlation Between UNITED RENTALS and Dassault Systèmes

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

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

Diversification Opportunities for UNITED RENTALS and Dassault Systèmes

-0.26

Correlation Coefficient

UNITED RENTALS  Dassault Systèmes

Very good diversification

The 3 months correlation between UNITED and Dassault is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and Dassault Systmes SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Systèmes 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 Dassault Systèmes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Systèmes has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and Dassault Systèmes go up and down completely randomly.

Pair Corralation between UNITED RENTALS and Dassault Systèmes

Assuming the 90 days trading horizon UNITED RENTALS is expected to generate 1.3 times more return on investment than Dassault Systèmes. However, UNITED RENTALS is 1.3 times more volatile than Dassault Systmes SE. It trades about 0.19 of its potential returns per unit of risk. Dassault Systmes SE is currently generating about 0.2 per unit of risk. If you would invest  69,080  in UNITED RENTALS on October 22, 2024 and sell it today you would earn a total of  4,160  from holding UNITED RENTALS or generate 6.02% 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.  Dassault Systmes SE

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Dassault Systèmes

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dassault Systmes SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dassault Systèmes 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 Dassault Systèmes

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

The idea behind UNITED RENTALS and Dassault Systmes SE 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.