Correlation Between United Rentals and NORFOLK

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

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

Diversification Opportunities for United Rentals and NORFOLK

0.5

Correlation Coefficient

United Rentals  NORFOLK

Very weak diversification

The 3 months correlation between United and NORFOLK is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and NORFOLK SOUTHN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORFOLK SOUTHN P 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 NORFOLK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORFOLK SOUTHN P has no effect on the direction of United Rentals i.e., United Rentals and NORFOLK go up and down completely randomly.

Pair Corralation between United Rentals and NORFOLK

Considering the 90-day investment horizon United Rentals is expected to generate 12.16 times less return on investment than NORFOLK. But when comparing it to its historical volatility, United Rentals is 20.7 times less risky than NORFOLK. It trades about 0.07 of its potential returns per unit of risk. NORFOLK SOUTHN P is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,404  in NORFOLK SOUTHN P on September 26, 2024 and sell it today you would earn a total of  369.00  from holding NORFOLK SOUTHN P or generate 3.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	87.5%
Values	Daily Returns

United Rentals  vs.  NORFOLK SOUTHN P

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. Despite latest weak 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.

NORFOLK SOUTHN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORFOLK SOUTHN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NORFOLK is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Rentals and NORFOLK

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

The idea behind United Rentals and NORFOLK SOUTHN P 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.