Correlation Between United Rentals and Mitsubishi UFJ

Can any of the company-specific risk be diversified away by investing in both United Rentals and Mitsubishi UFJ 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 UFJ 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 UFJ Lease, you can compare the effects of market volatilities on United Rentals and Mitsubishi UFJ 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 UFJ. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Mitsubishi UFJ.

Diversification Opportunities for United Rentals and Mitsubishi UFJ

-0.62

Correlation Coefficient

United Rentals  Mitsubishi UFJ

Excellent diversification

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

Pair Corralation between United Rentals and Mitsubishi UFJ

Considering the 90-day investment horizon United Rentals is expected to under-perform the Mitsubishi UFJ. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 1.43 times less risky than Mitsubishi UFJ. The stock trades about -0.07 of its potential returns per unit of risk. The Mitsubishi UFJ Lease is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,283  in Mitsubishi UFJ Lease on December 30, 2024 and sell it today you would earn a total of  112.00  from holding Mitsubishi UFJ Lease or generate 8.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	88.71%
Values	Daily Returns

United Rentals  vs.  Mitsubishi UFJ Lease

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 UFJ Lease

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Lease are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Mitsubishi UFJ showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and Mitsubishi UFJ

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

The idea behind United Rentals and Mitsubishi UFJ Lease 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.