Correlation Between United Rentals and ZhongAn Online
Can any of the company-specific risk be diversified away by investing in both United Rentals and ZhongAn Online 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 ZhongAn Online into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and ZhongAn Online P, you can compare the effects of market volatilities on United Rentals and ZhongAn Online 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 ZhongAn Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and ZhongAn Online.
Diversification Opportunities for United Rentals and ZhongAn Online
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and ZhongAn is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and ZhongAn Online P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZhongAn Online P 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 ZhongAn Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZhongAn Online P has no effect on the direction of United Rentals i.e., United Rentals and ZhongAn Online go up and down completely randomly.
Pair Corralation between United Rentals and ZhongAn Online
Assuming the 90 days horizon United Rentals is expected to generate 1.1 times more return on investment than ZhongAn Online. However, United Rentals is 1.1 times more volatile than ZhongAn Online P. It trades about 0.2 of its potential returns per unit of risk. ZhongAn Online P is currently generating about -0.07 per unit of risk. If you would invest 70,320 in United Rentals on October 24, 2024 and sell it today you would earn a total of 5,220 from holding United Rentals or generate 7.42% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
United Rentals vs. ZhongAn Online P
Performance |
Timeline |
United Rentals |
ZhongAn Online P |
United Rentals and ZhongAn Online Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United Rentals and ZhongAn Online
The main advantage of trading using opposite United Rentals and ZhongAn Online positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, ZhongAn Online 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 ZhongAn Online will offset losses from the drop in ZhongAn Online's long position.United Rentals vs. DAIDO METAL TD | United Rentals vs. Datadog | United Rentals vs. Northern Data AG | United Rentals vs. SIERRA METALS |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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