Correlation Between Rentokil Initial and International Business
Can any of the company-specific risk be diversified away by investing in both Rentokil Initial and International Business 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 International Business 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 International Business Machines, you can compare the effects of market volatilities on Rentokil Initial and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rentokil Initial and International Business.
Diversification Opportunities for Rentokil Initial and International Business
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rentokil and International is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Rentokil Initial plc and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Rentokil Initial i.e., Rentokil Initial and International Business go up and down completely randomly.
Pair Corralation between Rentokil Initial and International Business
Assuming the 90 days horizon Rentokil Initial is expected to generate 4.47 times less return on investment than International Business. In addition to that, Rentokil Initial is 2.05 times more volatile than International Business Machines. It trades about 0.01 of its total potential returns per unit of risk. International Business Machines is currently generating about 0.07 per unit of volatility. If you would invest 12,295 in International Business Machines on January 17, 2024 and sell it today you would earn a total of 5,830 from holding International Business Machines or generate 47.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.11% |
| Values | Daily Returns |
Rentokil Initial plc vs. International Business Machine
Performance |
| Timeline |
| Rentokil Initial plc |
| International Business |
Rentokil Initial and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rentokil Initial and International Business
The main advantage of trading using opposite Rentokil Initial and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rentokil Initial position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| Rentokil Initial vs. Thomson Reuters Corp | Rentokil Initial vs. Cintas | Rentokil Initial vs. Global Payments | Rentokil Initial vs. HUMANA INC |
| International Business vs. Globant SA | International Business vs. Concentrix | International Business vs. CDW Corp | International Business vs. BigBearai 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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