Correlation Between ABM Industries and Rentokil Initial
Can any of the company-specific risk be diversified away by investing in both ABM Industries 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 ABM Industries and Rentokil Initial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABM Industries Incorporated and Rentokil Initial PLC, you can compare the effects of market volatilities on ABM Industries 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 ABM Industries with a short position of Rentokil Initial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABM Industries and Rentokil Initial.
Diversification Opportunities for ABM Industries and Rentokil Initial
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ABM and Rentokil is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding ABM Industries Incorporated 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 ABM Industries 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 ABM Industries Incorporated 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 ABM Industries i.e., ABM Industries and Rentokil Initial go up and down completely randomly.
Pair Corralation between ABM Industries and Rentokil Initial
Considering the 90-day investment horizon ABM Industries Incorporated is expected to generate 1.09 times more return on investment than Rentokil Initial. However, ABM Industries is 1.09 times more volatile than Rentokil Initial PLC. It trades about 0.17 of its potential returns per unit of risk. Rentokil Initial PLC is currently generating about 0.11 per unit of risk. If you would invest 5,335 in ABM Industries Incorporated on August 24, 2024 and sell it today you would earn a total of 303.00 from holding ABM Industries Incorporated or generate 5.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABM Industries Incorporated vs. Rentokil Initial PLC
Performance |
| Timeline |
| ABM Industries |
| Rentokil Initial PLC |
ABM Industries and Rentokil Initial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABM Industries and Rentokil Initial
The main advantage of trading using opposite ABM Industries and Rentokil Initial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABM Industries 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.| ABM Industries vs. Cass Information Systems | ABM Industries vs. First Advantage Corp | ABM Industries vs. Rentokil Initial PLC | ABM Industries vs. CBIZ Inc |
| Rentokil Initial vs. Cass Information Systems | Rentokil Initial vs. First Advantage Corp | Rentokil Initial vs. CBIZ Inc | Rentokil Initial vs. Civeo Corp |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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