Correlation Between United Rentals and NGK Insulators
Can any of the company-specific risk be diversified away by investing in both United Rentals and NGK Insulators 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 NGK Insulators into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and NGK Insulators, you can compare the effects of market volatilities on United Rentals and NGK Insulators 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 NGK Insulators. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and NGK Insulators.
Diversification Opportunities for United Rentals and NGK Insulators
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and NGK is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and NGK Insulators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGK Insulators 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 NGK Insulators. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGK Insulators has no effect on the direction of United Rentals i.e., United Rentals and NGK Insulators go up and down completely randomly.
Pair Corralation between United Rentals and NGK Insulators
If you would invest 78,451 in United Rentals on September 5, 2024 and sell it today you would earn a total of 8,373 from holding United Rentals or generate 10.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
United Rentals vs. NGK Insulators
Performance |
| Timeline |
| United Rentals |
| NGK Insulators |
United Rentals and NGK Insulators Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and NGK Insulators
The main advantage of trading using opposite United Rentals and NGK Insulators positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, NGK Insulators 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 NGK Insulators will offset losses from the drop in NGK Insulators' long position.| United Rentals vs. HE Equipment Services | United Rentals vs. GATX Corporation | United Rentals vs. McGrath RentCorp | United Rentals vs. Alta Equipment Group |
| NGK Insulators vs. Dear Cashmere Holding | NGK Insulators vs. Goff Corp | NGK Insulators vs. Wialan Technologies | NGK Insulators vs. Cgrowth Capital |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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