Correlation Between UNITED RENTALS and Northrop Grumman
Can any of the company-specific risk be diversified away by investing in both UNITED RENTALS and Northrop Grumman 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 Northrop Grumman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UNITED RENTALS and Northrop Grumman, you can compare the effects of market volatilities on UNITED RENTALS and Northrop Grumman 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 Northrop Grumman. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED RENTALS and Northrop Grumman.
Diversification Opportunities for UNITED RENTALS and Northrop Grumman
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between UNITED and Northrop is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding UNITED RENTALS and Northrop Grumman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrop Grumman 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 Northrop Grumman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northrop Grumman has no effect on the direction of UNITED RENTALS i.e., UNITED RENTALS and Northrop Grumman go up and down completely randomly.
Pair Corralation between UNITED RENTALS and Northrop Grumman
Assuming the 90 days trading horizon UNITED RENTALS is expected to generate 1.62 times more return on investment than Northrop Grumman. However, UNITED RENTALS is 1.62 times more volatile than Northrop Grumman. It trades about 0.09 of its potential returns per unit of risk. Northrop Grumman is currently generating about 0.01 per unit of risk. If you would invest 34,240 in UNITED RENTALS on August 31, 2024 and sell it today you would earn a total of 46,580 from holding UNITED RENTALS or generate 136.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
UNITED RENTALS vs. Northrop Grumman
Performance |
| Timeline |
| UNITED RENTALS |
| Northrop Grumman |
UNITED RENTALS and Northrop Grumman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UNITED RENTALS and Northrop Grumman
The main advantage of trading using opposite UNITED RENTALS and Northrop Grumman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED RENTALS position performs unexpectedly, Northrop Grumman 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 Northrop Grumman will offset losses from the drop in Northrop Grumman's long position.| UNITED RENTALS vs. PLAYTECH | UNITED RENTALS vs. KOOL2PLAY SA ZY | UNITED RENTALS vs. LG Display Co | UNITED RENTALS vs. ePlay Digital |
| Northrop Grumman vs. GigaMedia | Northrop Grumman vs. Ryanair Holdings plc | Northrop Grumman vs. Sixt Leasing SE | Northrop Grumman vs. UNITED RENTALS |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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