Correlation Between Rentokil Initial and Global Payments
Can any of the company-specific risk be diversified away by investing in both Rentokil Initial and Global Payments 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 Rentokil Initial and Global Payments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rentokil Initial plc and Global Payments, you can compare the effects of market volatilities on Rentokil Initial and Global Payments 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 Rentokil Initial with a short position of Global Payments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rentokil Initial and Global Payments.
Diversification Opportunities for Rentokil Initial and Global Payments
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Rentokil and Global is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Rentokil Initial plc and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments and Rentokil Initial 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 Rentokil Initial plc are associated (or correlated) with Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of Rentokil Initial i.e., Rentokil Initial and Global Payments go up and down completely randomly.
Pair Corralation between Rentokil Initial and Global Payments
Assuming the 90 days horizon Rentokil Initial plc is expected to generate 3.06 times more return on investment than Global Payments. However, Rentokil Initial is 3.06 times more volatile than Global Payments. It trades about 0.26 of its potential returns per unit of risk. Global Payments is currently generating about -0.32 per unit of risk. If you would invest 464.00 in Rentokil Initial plc on January 20, 2024 and sell it today you would earn a total of 98.00 from holding Rentokil Initial plc or generate 21.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rentokil Initial plc vs. Global Payments
Performance |
| Timeline |
| Rentokil Initial plc |
| Global Payments |
Rentokil Initial and Global Payments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rentokil Initial and Global Payments
The main advantage of trading using opposite Rentokil Initial and Global Payments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rentokil Initial position performs unexpectedly, Global Payments 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 Global Payments will offset losses from the drop in Global Payments' long position.| Rentokil Initial vs. Aramark Holdings | Rentokil Initial vs. Civeo Corp | Rentokil Initial vs. ABM Industries Incorporated | Rentokil Initial vs. Maximus |
| Global Payments vs. Copart Inc | Global Payments vs. ABM Industries Incorporated | Global Payments vs. Thomson Reuters Corp | Global Payments vs. Aramark Holdings |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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