Correlation Between Norsk Hydro and United Rentals
Can any of the company-specific risk be diversified away by investing in both Norsk Hydro 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 Norsk Hydro and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Norsk Hydro ASA and United Rentals, you can compare the effects of market volatilities on Norsk Hydro 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 Norsk Hydro with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Norsk Hydro and United Rentals.
Diversification Opportunities for Norsk Hydro and United Rentals
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Norsk and United is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Norsk Hydro ASA and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and Norsk Hydro 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 Norsk Hydro ASA 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 Norsk Hydro i.e., Norsk Hydro and United Rentals go up and down completely randomly.
Pair Corralation between Norsk Hydro and United Rentals
Assuming the 90 days trading horizon Norsk Hydro is expected to generate 21.15 times less return on investment than United Rentals. In addition to that, Norsk Hydro is 1.01 times more volatile than United Rentals. It trades about 0.01 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 57,793 in United Rentals on September 2, 2024 and sell it today you would earn a total of 22,947 from holding United Rentals or generate 39.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Norsk Hydro ASA vs. United Rentals
Performance |
| Timeline |
| Norsk Hydro ASA |
| United Rentals |
Norsk Hydro and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Norsk Hydro and United Rentals
The main advantage of trading using opposite Norsk Hydro and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Norsk Hydro 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.| Norsk Hydro vs. TOREX SEMICONDUCTOR LTD | Norsk Hydro vs. Taiwan Semiconductor Manufacturing | Norsk Hydro vs. United Natural Foods | Norsk Hydro vs. Tyson Foods |
| United Rentals vs. Superior Plus Corp | United Rentals vs. NMI Holdings | United Rentals vs. Origin Agritech | United Rentals vs. SIVERS SEMICONDUCTORS AB |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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