Correlation Between Rentokil Initial and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Rentokil Initial and Wells Fargo 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 Wells Fargo 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 Wells Fargo, you can compare the effects of market volatilities on Rentokil Initial and Wells Fargo 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 Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rentokil Initial and Wells Fargo.
Diversification Opportunities for Rentokil Initial and Wells Fargo
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Rentokil and Wells is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Rentokil Initial plc and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo 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 Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo has no effect on the direction of Rentokil Initial i.e., Rentokil Initial and Wells Fargo go up and down completely randomly.
Pair Corralation between Rentokil Initial and Wells Fargo
Assuming the 90 days horizon Rentokil Initial plc is expected to generate 2.96 times more return on investment than Wells Fargo. However, Rentokil Initial is 2.96 times more volatile than Wells Fargo. It trades about 0.17 of its potential returns per unit of risk. Wells Fargo is currently generating about 0.28 per unit of risk. If you would invest 470.00 in Rentokil Initial plc on January 19, 2024 and sell it today you would earn a total of 92.00 from holding Rentokil Initial plc or generate 19.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.62% |
| Values | Daily Returns |
Rentokil Initial plc vs. Wells Fargo
Performance |
| Timeline |
| Rentokil Initial plc |
| Wells Fargo |
Rentokil Initial and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rentokil Initial and Wells Fargo
The main advantage of trading using opposite Rentokil Initial and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rentokil Initial position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo's long position.| Rentokil Initial vs. Aramark Holdings | Rentokil Initial vs. Civeo Corp | Rentokil Initial vs. ABM Industries Incorporated | Rentokil Initial vs. Maximus |
| Wells Fargo vs. Bank of America | Wells Fargo vs. JPMorgan Chase Co | Wells Fargo vs. Toronto Dominion Bank | Wells Fargo vs. Nu 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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