Correlation Between NETGEAR and United Rentals
Can any of the company-specific risk be diversified away by investing in both NETGEAR 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 NETGEAR and United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NETGEAR and United Rentals, you can compare the effects of market volatilities on NETGEAR 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 NETGEAR with a short position of United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of NETGEAR and United Rentals.
Diversification Opportunities for NETGEAR and United Rentals
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NETGEAR and United is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals and NETGEAR 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 NETGEAR 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 NETGEAR i.e., NETGEAR and United Rentals go up and down completely randomly.
Pair Corralation between NETGEAR and United Rentals
Given the investment horizon of 90 days NETGEAR is expected to generate 0.74 times more return on investment than United Rentals. However, NETGEAR is 1.36 times less risky than United Rentals. It trades about 0.4 of its potential returns per unit of risk. United Rentals is currently generating about 0.03 per unit of risk. If you would invest 2,033 in NETGEAR on August 24, 2024 and sell it today you would earn a total of 358.00 from holding NETGEAR or generate 17.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NETGEAR vs. United Rentals
Performance |
| Timeline |
| NETGEAR |
| United Rentals |
NETGEAR and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NETGEAR and United Rentals
The main advantage of trading using opposite NETGEAR and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR 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.| NETGEAR vs. KVH Industries | NETGEAR vs. Ituran Location and | NETGEAR vs. Aviat Networks | NETGEAR vs. Mynaric AG ADR |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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