Correlation Between United Rentals and Mitsubishi Estate

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

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

Diversification Opportunities for United Rentals and Mitsubishi Estate

-0.48

Correlation Coefficient

United Rentals  Mitsubishi Estate

Very good diversification

The 3 months correlation between United and Mitsubishi is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Mitsubishi Estate Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Estate 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 Mitsubishi Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Estate has no effect on the direction of United Rentals i.e., United Rentals and Mitsubishi Estate go up and down completely randomly.

Pair Corralation between United Rentals and Mitsubishi Estate

Considering the 90-day investment horizon United Rentals is expected to under-perform the Mitsubishi Estate. In addition to that, United Rentals is 1.1 times more volatile than Mitsubishi Estate Co. It trades about -0.05 of its total potential returns per unit of risk. Mitsubishi Estate Co is currently generating about 0.17 per unit of volatility. If you would invest  1,354  in Mitsubishi Estate Co on December 29, 2024 and sell it today you would earn a total of  304.00  from holding Mitsubishi Estate Co or generate 22.45% return on investment over 90 days.

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

United Rentals  vs.  Mitsubishi Estate Co

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.

Mitsubishi Estate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Estate Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Mitsubishi Estate reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and Mitsubishi Estate

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

The idea behind United Rentals and Mitsubishi Estate Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.