Correlation Between United Rentals and Banco Do

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

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

Diversification Opportunities for United Rentals and Banco Do

-0.03

Correlation Coefficient

United Rentals  Banco Do

Good diversification

The 3 months correlation between United and Banco is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Banco do Estado in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco do Estado 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 Banco Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco do Estado has no effect on the direction of United Rentals i.e., United Rentals and Banco Do go up and down completely randomly.

Pair Corralation between United Rentals and Banco Do

Considering the 90-day investment horizon United Rentals is expected to under-perform the Banco Do. In addition to that, United Rentals is 1.23 times more volatile than Banco do Estado. It trades about -0.22 of its total potential returns per unit of risk. Banco do Estado is currently generating about 0.07 per unit of volatility. If you would invest  1,016  in Banco do Estado on December 2, 2024 and sell it today you would earn a total of  64.00  from holding Banco do Estado or generate 6.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

United Rentals  vs.  Banco do Estado

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 uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Banco do Estado

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banco do Estado are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco Do may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with United Rentals and Banco Do

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

The idea behind United Rentals and Banco do Estado 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .