Correlation Between Neogen and United Rentals
Can any of the company-specific risk be diversified away by investing in both Neogen 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 Neogen and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Neogen and United Rentals, you can compare the effects of market volatilities on Neogen 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 Neogen with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neogen and United Rentals.
Diversification Opportunities for Neogen and United Rentals
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Neogen and United is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Neogen and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Neogen 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 Neogen 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 Neogen i.e., Neogen and United Rentals go up and down completely randomly.
Pair Corralation between Neogen and United Rentals
Given the investment horizon of 90 days Neogen is expected to generate 3.95 times less return on investment than United Rentals. In addition to that, Neogen is 1.2 times more volatile than United Rentals. It trades about 0.02 of its total potential returns per unit of risk. United Rentals is currently generating about 0.11 per unit of volatility. If you would invest 82,310 in United Rentals on August 29, 2024 and sell it today you would earn a total of 5,007 from holding United Rentals or generate 6.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Neogen vs. United Rentals
Performance |
| Timeline |
| Neogen |
| United Rentals |
Neogen and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Neogen and United Rentals
The main advantage of trading using opposite Neogen and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neogen 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' long position.The idea behind Neogen 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.| United Rentals vs. HE Equipment Services | United Rentals vs. GATX Corporation | United Rentals vs. McGrath RentCorp | United Rentals vs. Alta Equipment Group |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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