Correlation Between UNITED RENTALS and NetSol Technologies

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

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

Diversification Opportunities for UNITED RENTALS and NetSol Technologies

0.08

Correlation Coefficient

UNITED RENTALS  NetSol Technologies

Significant diversification

The 3 months correlation between UNITED and NetSol is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and NetSol Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetSol Technologies 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 NetSol Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetSol Technologies has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and NetSol Technologies go up and down completely randomly.

Pair Corralation between UNITED RENTALS and NetSol Technologies

Assuming the 90 days trading horizon UNITED RENTALS is expected to generate 0.8 times more return on investment than NetSol Technologies. However, UNITED RENTALS is 1.26 times less risky than NetSol Technologies. It trades about 0.06 of its potential returns per unit of risk. NetSol Technologies is currently generating about 0.03 per unit of risk. If you would invest  49,623  in UNITED RENTALS on October 9, 2024 and sell it today you would earn a total of  15,717  from holding UNITED RENTALS or generate 31.67% return on investment over 90 days.

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

UNITED RENTALS  vs.  NetSol Technologies

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.

NetSol Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NetSol Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with UNITED RENTALS and NetSol Technologies

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

The idea behind UNITED RENTALS and NetSol Technologies 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.