Correlation Between United Rentals and Novo Nordisk

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

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

Diversification Opportunities for United Rentals and Novo Nordisk

-0.74

Correlation Coefficient

United Rentals  Novo Nordisk

Pay attention - limited upside

The 3 months correlation between United and Novo is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Novo Nordisk AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novo Nordisk AS 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 Novo Nordisk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novo Nordisk AS has no effect on the direction of United Rentals i.e., United Rentals and Novo Nordisk go up and down completely randomly.

Pair Corralation between United Rentals and Novo Nordisk

Considering the 90-day investment horizon United Rentals is expected to under-perform the Novo Nordisk. But the stock apears to be less risky and, when comparing its historical volatility, United Rentals is 1.2 times less risky than Novo Nordisk. The stock trades about -0.23 of its potential returns per unit of risk. The Novo Nordisk AS is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  10,543  in Novo Nordisk AS on September 13, 2024 and sell it today you would earn a total of  557.00  from holding Novo Nordisk AS or generate 5.28% return on investment over 90 days.

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

United Rentals  vs.  Novo Nordisk AS

United Rentals

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, United Rentals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Novo Nordisk AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novo Nordisk AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with United Rentals and Novo Nordisk

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

The idea behind United Rentals and Novo Nordisk AS 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.