Correlation Between UNITED RENTALS and SBI Insurance

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

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

Diversification Opportunities for UNITED RENTALS and SBI Insurance

-0.2

Correlation Coefficient

UNITED RENTALS  SBI Insurance

Good diversification

The 3 months correlation between UNITED and SBI is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and SBI Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Insurance Group 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 SBI Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Insurance Group has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and SBI Insurance go up and down completely randomly.

Pair Corralation between UNITED RENTALS and SBI Insurance

Assuming the 90 days trading horizon UNITED RENTALS is expected to generate 1.24 times more return on investment than SBI Insurance. However, UNITED RENTALS is 1.24 times more volatile than SBI Insurance Group. It trades about 0.07 of its potential returns per unit of risk. SBI Insurance Group is currently generating about 0.0 per unit of risk. If you would invest  33,416  in UNITED RENTALS on October 11, 2024 and sell it today you would earn a total of  32,524  from holding UNITED RENTALS or generate 97.33% 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.  SBI Insurance Group

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.

SBI Insurance Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SBI Insurance Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SBI Insurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNITED RENTALS and SBI Insurance

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

The idea behind UNITED RENTALS and SBI Insurance Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.