Correlation Between Heartland Express and UNITED RENTALS

Can any of the company-specific risk be diversified away by investing in both Heartland Express and UNITED RENTALS 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 Heartland Express and UNITED RENTALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heartland Express and UNITED RENTALS, you can compare the effects of market volatilities on Heartland Express and UNITED RENTALS 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 Heartland Express with a short position of UNITED RENTALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heartland Express and UNITED RENTALS.

Diversification Opportunities for Heartland Express and UNITED RENTALS

0.68

Correlation Coefficient

Heartland Express  UNITED RENTALS

Poor diversification

The 3 months correlation between Heartland and UNITED is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Heartland Express and UNITED RENTALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED RENTALS and Heartland Express 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 Heartland Express are associated (or correlated) with UNITED RENTALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED RENTALS has no effect on the direction of Heartland Express i.e., Heartland Express and UNITED RENTALS go up and down completely randomly.

Pair Corralation between Heartland Express and UNITED RENTALS

Assuming the 90 days horizon Heartland Express is expected to generate 0.82 times more return on investment than UNITED RENTALS. However, Heartland Express is 1.22 times less risky than UNITED RENTALS. It trades about -0.43 of its potential returns per unit of risk. UNITED RENTALS is currently generating about -0.77 per unit of risk. If you would invest  1,188  in Heartland Express on October 5, 2024 and sell it today you would lose (108.00) from holding Heartland Express or give up 9.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Heartland Express  vs.  UNITED RENTALS

Heartland Express

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Heartland Express are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Heartland Express may actually be approaching a critical reversion point that can send shares even higher in February 2025.

UNITED RENTALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNITED RENTALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, UNITED RENTALS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Heartland Express and UNITED RENTALS

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

The idea behind Heartland Express and UNITED RENTALS 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.