Correlation Between United Rentals and Barloworld

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Can any of the company-specific risk be diversified away by investing in both United Rentals and Barloworld 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 Barloworld into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Barloworld Ltd ADR, you can compare the effects of market volatilities on United Rentals and Barloworld 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 Barloworld. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Barloworld.

Diversification Opportunities for United Rentals and Barloworld

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between United and Barloworld is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR 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 Barloworld. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barloworld ADR has no effect on the direction of United Rentals i.e., United Rentals and Barloworld go up and down completely randomly.

Pair Corralation between United Rentals and Barloworld

Considering the 90-day investment horizon United Rentals is expected to generate 0.84 times more return on investment than Barloworld. However, United Rentals is 1.19 times less risky than Barloworld. It trades about 0.3 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about -0.21 per unit of risk. If you would invest  64,537  in United Rentals on April 25, 2024 and sell it today you would earn a total of  9,857  from holding United Rentals or generate 15.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

United Rentals  vs.  Barloworld Ltd ADR

 Performance 
       Timeline  
United Rentals 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 2 (%) 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 recent stock price confusion, may contribute to short-horizon losses for the traders.
Barloworld ADR 

Risk-Adjusted Performance

0 of 100

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

United Rentals and Barloworld Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Rentals and Barloworld

The main advantage of trading using opposite United Rentals and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Barloworld 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 Barloworld will offset losses from the drop in Barloworld's long position.
The idea behind United Rentals and Barloworld Ltd ADR 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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