Correlation Between UNITED RENTALS and Nestl SA

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

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

Diversification Opportunities for UNITED RENTALS and Nestl SA

-0.84

Correlation Coefficient

UNITED RENTALS  Nestl SA

Pay attention - limited upside

The 3 months correlation between UNITED and Nestl is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestl SA 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 Nestl SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestl SA has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and Nestl SA go up and down completely randomly.

Pair Corralation between UNITED RENTALS and Nestl SA

Assuming the 90 days trading horizon UNITED RENTALS is expected to under-perform the Nestl SA. In addition to that, UNITED RENTALS is 1.33 times more volatile than Nestl SA. It trades about -0.09 of its total potential returns per unit of risk. Nestl SA is currently generating about 0.16 per unit of volatility. If you would invest  8,040  in Nestl SA on December 29, 2024 and sell it today you would earn a total of  1,360  from holding Nestl SA or generate 16.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

UNITED RENTALS  vs.  Nestl SA

UNITED RENTALS

Risk-Adjusted Performance

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 unsteady 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.

Nestl SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nestl SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Nestl SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNITED RENTALS and Nestl SA

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

The idea behind UNITED RENTALS and Nestl SA 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.