Correlation Between Rentokil Initial and Paychex
Can any of the company-specific risk be diversified away by investing in both Rentokil Initial and Paychex 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 Paychex 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 Paychex, you can compare the effects of market volatilities on Rentokil Initial and Paychex 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 Paychex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rentokil Initial and Paychex.
Diversification Opportunities for Rentokil Initial and Paychex
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rentokil and Paychex is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Rentokil Initial plc and Paychex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paychex 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 Paychex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paychex has no effect on the direction of Rentokil Initial i.e., Rentokil Initial and Paychex go up and down completely randomly.
Pair Corralation between Rentokil Initial and Paychex
Assuming the 90 days horizon Rentokil Initial plc is expected to generate 1.11 times more return on investment than Paychex. However, Rentokil Initial is 1.11 times more volatile than Paychex. It trades about 0.16 of its potential returns per unit of risk. Paychex is currently generating about 0.09 per unit of risk. If you would invest 538.00 in Rentokil Initial plc on January 25, 2024 and sell it today you would earn a total of 24.00 from holding Rentokil Initial plc or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Rentokil Initial plc vs. Paychex
Performance |
| Timeline |
| Rentokil Initial plc |
| Paychex |
Rentokil Initial and Paychex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rentokil Initial and Paychex
The main advantage of trading using opposite Rentokil Initial and Paychex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rentokil Initial position performs unexpectedly, Paychex 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 Paychex will offset losses from the drop in Paychex's long position.| Rentokil Initial vs. Thomson Reuters Corp | Rentokil Initial vs. Cintas | Rentokil Initial vs. Global Payments | Rentokil Initial vs. Wolters Kluwer NV |
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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