Correlation Between United Rentals and HMM

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

By analyzing existing cross correlation between United Rentals and HMM Co, you can compare the effects of market volatilities on United Rentals and HMM 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 HMM. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and HMM.

Diversification Opportunities for United Rentals and HMM

-0.69

Correlation Coefficient

United Rentals  HMM

Excellent diversification

The 3 months correlation between United and HMM is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and HMM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMM Co 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 HMM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMM Co has no effect on the direction of United Rentals i.e., United Rentals and HMM go up and down completely randomly.

Pair Corralation between United Rentals and HMM

Considering the 90-day investment horizon United Rentals is expected to under-perform the HMM. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 1.2 times less risky than HMM. The stock trades about -0.05 of its potential returns per unit of risk. The HMM Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,713,020  in HMM Co on December 29, 2024 and sell it today you would earn a total of  253,980  from holding HMM Co or generate 14.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.08%
Values	Daily Returns

United Rentals  vs.  HMM Co

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. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

HMM Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HMM Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HMM sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and HMM

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

The idea behind United Rentals and HMM Co 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.