Correlation Between United Rentals and TF Bank

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

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

Diversification Opportunities for United Rentals and TF Bank

0.27

Correlation Coefficient

United Rentals  TF Bank

Modest diversification

The 3 months correlation between United and TFBANK is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and TF Bank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TF Bank AB 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 TF Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TF Bank AB has no effect on the direction of United Rentals i.e., United Rentals and TF Bank go up and down completely randomly.

Pair Corralation between United Rentals and TF Bank

Considering the 90-day investment horizon United Rentals is expected to under-perform the TF Bank. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 1.1 times less risky than TF Bank. The stock trades about -0.07 of its potential returns per unit of risk. The TF Bank AB is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  37,500  in TF Bank AB on December 27, 2024 and sell it today you would lose (2,600) from holding TF Bank AB or give up 6.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

United Rentals  vs.  TF Bank AB

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.

TF Bank AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days TF Bank AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, TF Bank 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 TF Bank

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

The idea behind United Rentals and TF Bank AB 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.