Correlation Between United Rentals and New Nordic

Can any of the company-specific risk be diversified away by investing in both United Rentals and New Nordic 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 Nordic 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 Nordic Healthbrands, you can compare the effects of market volatilities on United Rentals and New Nordic 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 Nordic. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and New Nordic.

Diversification Opportunities for United Rentals and New Nordic

-0.37

Correlation Coefficient

United Rentals  New Nordic

Very good diversification

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

Pair Corralation between United Rentals and New Nordic

Considering the 90-day investment horizon United Rentals is expected to generate 1.0 times more return on investment than New Nordic. However, United Rentals is 1.0 times more volatile than New Nordic Healthbrands. It trades about -0.06 of its potential returns per unit of risk. New Nordic Healthbrands is currently generating about -0.07 per unit of risk. If you would invest  71,484  in United Rentals on December 27, 2024 and sell it today you would lose (6,814) from holding United Rentals or give up 9.53% of portfolio value over 90 days.

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

United Rentals  vs.  New Nordic Healthbrands

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.

New Nordic Healthbrands

Risk-Adjusted Performance

Very Weak

Over the last 90 days New Nordic Healthbrands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with United Rentals and New Nordic

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

The idea behind United Rentals and New Nordic Healthbrands 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.