Correlation Between Dupont De and Rentokil Initial

Can any of the company-specific risk be diversified away by investing in both Dupont De and Rentokil Initial 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 Dupont De and Rentokil Initial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dupont De Nemours and Rentokil Initial plc, you can compare the effects of market volatilities on Dupont De and Rentokil Initial 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 Dupont De with a short position of Rentokil Initial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and Rentokil Initial.

Diversification Opportunities for Dupont De and Rentokil Initial

0.62

Correlation Coefficient

Dupont De  Rentokil Initial

Poor diversification

The 3 months correlation between Dupont and Rentokil is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Rentokil Initial plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rentokil Initial plc and Dupont De 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 Dupont De Nemours are associated (or correlated) with Rentokil Initial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rentokil Initial plc has no effect on the direction of Dupont De i.e., Dupont De and Rentokil Initial go up and down completely randomly.

Pair Corralation between Dupont De and Rentokil Initial

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to generate 1.24 times more return on investment than Rentokil Initial. However, Dupont De is 1.24 times more volatile than Rentokil Initial plc. It trades about 0.07 of its potential returns per unit of risk. Rentokil Initial plc is currently generating about -0.03 per unit of risk. If you would invest  7,553  in Dupont De Nemours on February 5, 2024 and sell it today you would earn a total of  214.00  from holding Dupont De Nemours or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Dupont De Nemours  vs.  Rentokil Initial plc

Dupont De Nemours

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Dupont De exhibited solid returns over the last few months and may actually be approaching a breakup point.

Rentokil Initial plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rentokil Initial plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Rentokil Initial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and Rentokil Initial

The main advantage of trading using opposite Dupont De and Rentokil Initial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De position performs unexpectedly, Rentokil Initial 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 Rentokil Initial will offset losses from the drop in Rentokil Initial's long position.

The idea behind Dupont De Nemours and Rentokil Initial plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.