Correlation Between United Rentals and Indonesia Fibreboard

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

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

Diversification Opportunities for United Rentals and Indonesia Fibreboard

0.54

Correlation Coefficient

United Rentals  Indonesia Fibreboard

Very weak diversification

The 3 months correlation between United and Indonesia is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Indonesia Fibreboard Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indonesia Fibreboard 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 Indonesia Fibreboard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indonesia Fibreboard has no effect on the direction of United Rentals i.e., United Rentals and Indonesia Fibreboard go up and down completely randomly.

Pair Corralation between United Rentals and Indonesia Fibreboard

Considering the 90-day investment horizon United Rentals is expected to generate 1.13 times less return on investment than Indonesia Fibreboard. But when comparing it to its historical volatility, United Rentals is 1.09 times less risky than Indonesia Fibreboard. It trades about 0.1 of its potential returns per unit of risk. Indonesia Fibreboard Industry is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  18,242  in Indonesia Fibreboard Industry on September 12, 2024 and sell it today you would earn a total of  2,358  from holding Indonesia Fibreboard Industry or generate 12.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

United Rentals  vs.  Indonesia Fibreboard Industry

United Rentals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, United Rentals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Indonesia Fibreboard

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indonesia Fibreboard Industry are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Indonesia Fibreboard disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and Indonesia Fibreboard

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

The idea behind United Rentals and Indonesia Fibreboard Industry 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.