Correlation Between United Rentals and Modernland Realty

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

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

Diversification Opportunities for United Rentals and Modernland Realty

0.17

Correlation Coefficient

United Rentals  Modernland Realty

Average diversification

The 3 months correlation between United and Modernland is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Modernland Realty Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modernland Realty 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 Modernland Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modernland Realty has no effect on the direction of United Rentals i.e., United Rentals and Modernland Realty go up and down completely randomly.

Pair Corralation between United Rentals and Modernland Realty

Considering the 90-day investment horizon United Rentals is expected to generate 0.97 times more return on investment than Modernland Realty. However, United Rentals is 1.03 times less risky than Modernland Realty. It trades about 0.1 of its potential returns per unit of risk. Modernland Realty Ltd is currently generating about -0.07 per unit of risk. If you would invest  28,875  in United Rentals on February 26, 2024 and sell it today you would earn a total of  38,480  from holding United Rentals or generate 133.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.93%
Values	Daily Returns

United Rentals  vs.  Modernland Realty Ltd

United Rentals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, United Rentals is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Modernland Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modernland Realty Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with United Rentals and Modernland Realty

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

The idea behind United Rentals and Modernland Realty Ltd 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.