Correlation Between United Rentals and Evotec SE

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

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

Diversification Opportunities for United Rentals and Evotec SE

0.42

Correlation Coefficient

United Rentals  Evotec SE

Very weak diversification

The 3 months correlation between United and Evotec is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Evotec SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evotec SE ADR 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 Evotec SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evotec SE ADR has no effect on the direction of United Rentals i.e., United Rentals and Evotec SE go up and down completely randomly.

Pair Corralation between United Rentals and Evotec SE

Considering the 90-day investment horizon United Rentals is expected to under-perform the Evotec SE. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 1.76 times less risky than Evotec SE. The stock trades about -0.23 of its potential returns per unit of risk. The Evotec SE ADR is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  472.00  in Evotec SE ADR on December 1, 2024 and sell it today you would lose (50.00) from holding Evotec SE ADR or give up 10.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

United Rentals  vs.  Evotec SE ADR

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.

Evotec SE ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evotec SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with United Rentals and Evotec SE

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

The idea behind United Rentals and Evotec SE ADR 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.