Correlation Between United Rentals and Ifishdeco

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

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

Diversification Opportunities for United Rentals and Ifishdeco

0.62

Correlation Coefficient

United Rentals  Ifishdeco

Poor diversification

The 3 months correlation between United and Ifishdeco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Ifishdeco PT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ifishdeco PT 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 Ifishdeco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ifishdeco PT has no effect on the direction of United Rentals i.e., United Rentals and Ifishdeco go up and down completely randomly.

Pair Corralation between United Rentals and Ifishdeco

Considering the 90-day investment horizon United Rentals is expected to under-perform the Ifishdeco. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 2.33 times less risky than Ifishdeco. The stock trades about -0.07 of its potential returns per unit of risk. The Ifishdeco PT is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  83,000  in Ifishdeco PT on December 30, 2024 and sell it today you would lose (11,000) from holding Ifishdeco PT or give up 13.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

United Rentals  vs.  Ifishdeco PT

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.

Ifishdeco PT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ifishdeco PT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Ifishdeco is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with United Rentals and Ifishdeco

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

The idea behind United Rentals and Ifishdeco PT 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.