Correlation Between United Rentals and New Economy
Can any of the company-specific risk be diversified away by investing in both United Rentals and New Economy 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 New Economy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and New Economy Fund, you can compare the effects of market volatilities on United Rentals and New Economy 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 New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and New Economy.
Diversification Opportunities for United Rentals and New Economy
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and New is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund 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 New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of United Rentals i.e., United Rentals and New Economy go up and down completely randomly.
Pair Corralation between United Rentals and New Economy
Considering the 90-day investment horizon United Rentals is expected to under-perform the New Economy. In addition to that, United Rentals is 2.97 times more volatile than New Economy Fund. It trades about -0.03 of its total potential returns per unit of risk. New Economy Fund is currently generating about 0.27 per unit of volatility. If you would invest 5,731 in New Economy Fund on February 26, 2024 and sell it today you would earn a total of 268.00 from holding New Economy Fund or generate 4.68% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
United Rentals vs. New Economy Fund
Performance |
Timeline |
United Rentals |
New Economy Fund |
United Rentals and New Economy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United Rentals and New Economy
The main advantage of trading using opposite United Rentals and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.United Rentals vs. McGrath RentCorp | United Rentals vs. Ryder System | United Rentals vs. Hertz Global Holdings | United Rentals vs. Hertz Global Hldgs |
New Economy vs. Income Fund Of | New Economy vs. New World Fund | New Economy vs. American Mutual Fund | New Economy vs. American Mutual Fund |
Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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