Correlation Between United Rentals and Rathdowney Resources

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

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

Diversification Opportunities for United Rentals and Rathdowney Resources

-0.02

Correlation Coefficient

United Rentals  Rathdowney Resources

Good diversification

The 3 months correlation between United and Rathdowney is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Rathdowney Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rathdowney Resources 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 Rathdowney Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rathdowney Resources has no effect on the direction of United Rentals i.e., United Rentals and Rathdowney Resources go up and down completely randomly.

Pair Corralation between United Rentals and Rathdowney Resources

Considering the 90-day investment horizon United Rentals is expected to generate 6.1 times less return on investment than Rathdowney Resources. But when comparing it to its historical volatility, United Rentals is 10.11 times less risky than Rathdowney Resources. It trades about 0.1 of its potential returns per unit of risk. Rathdowney Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Rathdowney Resources on September 12, 2024 and sell it today you would lose (0.50) from holding Rathdowney Resources or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

United Rentals  vs.  Rathdowney Resources

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.

Rathdowney Resources

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with United Rentals and Rathdowney Resources

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

The idea behind United Rentals and Rathdowney Resources 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.