Correlation Between United Rentals and Citic Guoan

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

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

Diversification Opportunities for United Rentals and Citic Guoan

-0.67

Correlation Coefficient

United Rentals  Citic Guoan

Excellent diversification

The 3 months correlation between United and Citic is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Citic Guoan Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Guoan Wine 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 Citic Guoan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Guoan Wine has no effect on the direction of United Rentals i.e., United Rentals and Citic Guoan go up and down completely randomly.

Pair Corralation between United Rentals and Citic Guoan

Considering the 90-day investment horizon United Rentals is expected to under-perform the Citic Guoan. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 1.01 times less risky than Citic Guoan. The stock trades about -0.05 of its potential returns per unit of risk. The Citic Guoan Wine is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  526.00  in Citic Guoan Wine on December 29, 2024 and sell it today you would earn a total of  36.00  from holding Citic Guoan Wine or generate 6.84% 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.  Citic Guoan Wine

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.

Citic Guoan Wine

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Citic Guoan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with United Rentals and Citic Guoan

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

The idea behind United Rentals and Citic Guoan Wine 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.