Correlation Between United Rentals and Norfolk Southern
Can any of the company-specific risk be diversified away by investing in both United Rentals and Norfolk Southern 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 Southern 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 Southern, you can compare the effects of market volatilities on United Rentals and Norfolk Southern 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 Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Norfolk Southern.
Diversification Opportunities for United Rentals and Norfolk Southern
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Norfolk is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern 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 Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norfolk Southern has no effect on the direction of United Rentals i.e., United Rentals and Norfolk Southern go up and down completely randomly.
Pair Corralation between United Rentals and Norfolk Southern
Considering the 90-day investment horizon United Rentals is expected to generate 1.67 times less return on investment than Norfolk Southern. But when comparing it to its historical volatility, United Rentals is 1.19 times less risky than Norfolk Southern. It trades about 0.12 of its potential returns per unit of risk. Norfolk Southern is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 22,071 in Norfolk Southern on September 3, 2024 and sell it today you would earn a total of 3,929 from holding Norfolk Southern or generate 17.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.67% |
| Values | Daily Returns |
United Rentals vs. Norfolk Southern
Performance |
| Timeline |
| United Rentals |
| Norfolk Southern |
United Rentals and Norfolk Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and Norfolk Southern
The main advantage of trading using opposite United Rentals and Norfolk Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Norfolk Southern 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 Southern will offset losses from the drop in Norfolk Southern's long position.| United Rentals vs. Alta Equipment Group | United Rentals vs. McGrath RentCorp | United Rentals vs. Herc Holdings | United Rentals vs. HE Equipment Services |
| Norfolk Southern vs. Superior Plus Corp | Norfolk Southern vs. NMI Holdings | Norfolk Southern vs. Origin Agritech | Norfolk Southern 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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