Correlation Between United Rentals and DIC Holdings

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

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

Diversification Opportunities for United Rentals and DIC Holdings

-0.75

Correlation Coefficient

United Rentals  DIC Holdings

Pay attention - limited upside

The 3 months correlation between United and DIC is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and DIC Holdings Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIC Holdings Construction 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 DIC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIC Holdings Construction has no effect on the direction of United Rentals i.e., United Rentals and DIC Holdings go up and down completely randomly.

Pair Corralation between United Rentals and DIC Holdings

Considering the 90-day investment horizon United Rentals is expected to under-perform the DIC Holdings. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 1.1 times less risky than DIC Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The DIC Holdings Construction is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,280,500  in DIC Holdings Construction on December 27, 2024 and sell it today you would earn a total of  119,500  from holding DIC Holdings Construction or generate 9.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

United Rentals  vs.  DIC Holdings Construction

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.

DIC Holdings Construction

Risk-Adjusted Performance

Insignificant

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

Pair Trading with United Rentals and DIC Holdings

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

The idea behind United Rentals and DIC Holdings Construction 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.