Correlation Between United Rentals and Chewathai Public

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

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

Diversification Opportunities for United Rentals and Chewathai Public

0.13

Correlation Coefficient

United Rentals  Chewathai Public

Average diversification

The 3 months correlation between United and Chewathai is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Chewathai Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chewathai Public 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 Chewathai Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chewathai Public has no effect on the direction of United Rentals i.e., United Rentals and Chewathai Public go up and down completely randomly.

Pair Corralation between United Rentals and Chewathai Public

Considering the 90-day investment horizon United Rentals is expected to generate 15.25 times less return on investment than Chewathai Public. But when comparing it to its historical volatility, United Rentals is 28.65 times less risky than Chewathai Public. It trades about 0.11 of its potential returns per unit of risk. Chewathai Public is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  50.00  in Chewathai Public on September 4, 2024 and sell it today you would lose (10.00) from holding Chewathai Public or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.76%
Values	Daily Returns

United Rentals  vs.  Chewathai Public

United Rentals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, United Rentals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Chewathai Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chewathai Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Chewathai Public is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Rentals and Chewathai Public

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

The idea behind United Rentals and Chewathai Public 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.