Correlation Between United Rentals and Novan

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

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

Diversification Opportunities for United Rentals and Novan

0.0

Correlation Coefficient

United Rentals  Novan

Pay attention - limited upside

The 3 months correlation between United and Novan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Novan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novan Inc 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 Novan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novan Inc has no effect on the direction of United Rentals i.e., United Rentals and Novan go up and down completely randomly.

Pair Corralation between United Rentals and Novan

If you would invest (100.00) in Novan Inc on December 25, 2024 and sell it today you would earn a total of  100.00  from holding Novan Inc or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

United Rentals  vs.  Novan Inc

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.

Novan Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Novan Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Novan is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with United Rentals and Novan

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

The idea behind United Rentals and Novan Inc 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.