Correlation Between Clean Harbors and Rentokil Initial

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

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

Diversification Opportunities for Clean Harbors and Rentokil Initial

0.7

Correlation Coefficient

Clean Harbors  Rentokil Initial

Poor diversification

The 3 months correlation between Clean and Rentokil is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Clean Harbors 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 Clean Harbors 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 Clean Harbors 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 Clean Harbors i.e., Clean Harbors and Rentokil Initial go up and down completely randomly.

Pair Corralation between Clean Harbors and Rentokil Initial

Considering the 90-day investment horizon Clean Harbors is expected to under-perform the Rentokil Initial. But the stock apears to be less risky and, when comparing its historical volatility, Clean Harbors is 1.27 times less risky than Rentokil Initial. The stock trades about -0.11 of its potential returns per unit of risk. The Rentokil Initial PLC is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,346  in Rentokil Initial PLC on January 17, 2025 and sell it today you would lose (162.00) from holding Rentokil Initial PLC or give up 6.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Clean Harbors  vs.  Rentokil Initial PLC

Clean Harbors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Clean Harbors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in May 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Rentokil Initial PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rentokil Initial PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Rentokil Initial is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Clean Harbors and Rentokil Initial

The main advantage of trading using opposite Clean Harbors and Rentokil Initial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clean Harbors 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 Clean Harbors 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.