Correlation Between United Rentals and American Nortel
Can any of the company-specific risk be diversified away by investing in both United Rentals and American Nortel 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 American Nortel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and American Nortel Communications, you can compare the effects of market volatilities on United Rentals and American Nortel 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 American Nortel. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and American Nortel.
Diversification Opportunities for United Rentals and American Nortel
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and American is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and American Nortel Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Nortel Comm 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 American Nortel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Nortel Comm has no effect on the direction of United Rentals i.e., United Rentals and American Nortel go up and down completely randomly.
Pair Corralation between United Rentals and American Nortel
Considering the 90-day investment horizon United Rentals is expected to under-perform the American Nortel. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 3.71 times less risky than American Nortel. The stock trades about -0.07 of its potential returns per unit of risk. The American Nortel Communications is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2.20 in American Nortel Communications on December 2, 2024 and sell it today you would lose (0.09) from holding American Nortel Communications or give up 4.09% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 93.02% |
Values | Daily Returns |
United Rentals vs. American Nortel Communications
Performance |
Timeline |
United Rentals |
American Nortel Comm |
United Rentals and American Nortel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United Rentals and American Nortel
The main advantage of trading using opposite United Rentals and American Nortel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, American Nortel 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 American Nortel will offset losses from the drop in American Nortel's long position.United Rentals vs. HE Equipment Services | United Rentals vs. GATX Corporation | United Rentals vs. McGrath RentCorp | United Rentals vs. Alta Equipment Group |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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