Correlation Between United Rentals and Nippon Yusen

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

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

Diversification Opportunities for United Rentals and Nippon Yusen

-0.38

Correlation Coefficient

United Rentals  Nippon Yusen

Very good diversification

The 3 months correlation between United and Nippon is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Nippon Yusen Kabushiki in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Yusen Kabushiki 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 Nippon Yusen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Yusen Kabushiki has no effect on the direction of United Rentals i.e., United Rentals and Nippon Yusen go up and down completely randomly.

Pair Corralation between United Rentals and Nippon Yusen

Considering the 90-day investment horizon United Rentals is expected to generate 0.88 times more return on investment than Nippon Yusen. However, United Rentals is 1.14 times less risky than Nippon Yusen. It trades about 0.1 of its potential returns per unit of risk. Nippon Yusen Kabushiki is currently generating about -0.01 per unit of risk. If you would invest  71,129  in United Rentals on September 12, 2024 and sell it today you would earn a total of  8,473  from holding United Rentals or generate 11.91% return on investment over 90 days.

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

United Rentals  vs.  Nippon Yusen Kabushiki

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.

Nippon Yusen Kabushiki

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Yusen Kabushiki has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Nippon Yusen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Rentals and Nippon Yusen

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

The idea behind United Rentals and Nippon Yusen Kabushiki 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.