Correlation Between UNITED RENTALS and International Business

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Can any of the company-specific risk be diversified away by investing in both UNITED RENTALS and International Business 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 International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UNITED RENTALS and International Business Machines, you can compare the effects of market volatilities on UNITED RENTALS and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED RENTALS and International Business.

Diversification Opportunities for UNITED RENTALS and International Business

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between UNITED and International is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and International Business go up and down completely randomly.

Pair Corralation between UNITED RENTALS and International Business

Assuming the 90 days trading horizon UNITED RENTALS is expected to generate 1.12 times more return on investment than International Business. However, UNITED RENTALS is 1.12 times more volatile than International Business Machines. It trades about 0.25 of its potential returns per unit of risk. International Business Machines is currently generating about 0.19 per unit of risk. If you would invest  61,178  in UNITED RENTALS on September 7, 2024 and sell it today you would earn a total of  20,802  from holding UNITED RENTALS or generate 34.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.46%
ValuesDaily Returns

UNITED RENTALS  vs.  International Business Machine

 Performance 
       Timeline  
UNITED RENTALS 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in UNITED RENTALS are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, UNITED RENTALS exhibited solid returns over the last few months and may actually be approaching a breakup point.
International Business 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, International Business reported solid returns over the last few months and may actually be approaching a breakup point.

UNITED RENTALS and International Business Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with UNITED RENTALS and International Business

The main advantage of trading using opposite UNITED RENTALS and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED RENTALS position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.
The idea behind UNITED RENTALS and International Business Machines 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.
Check out your portfolio center.
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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