Correlation Between British Amer and Rentokil Initial

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Can any of the company-specific risk be diversified away by investing in both British Amer 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 British Amer and Rentokil Initial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Rentokil Initial plc, you can compare the effects of market volatilities on British Amer 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 British Amer with a short position of Rentokil Initial. Check out your portfolio center. Please also check ongoing floating volatility patterns of British Amer and Rentokil Initial.

Diversification Opportunities for British Amer and Rentokil Initial

BritishRentokilDiversified AwayBritishRentokilDiversified Away100%
-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between British and Rentokil is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco 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 British Amer 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 British American Tobacco 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 British Amer i.e., British Amer and Rentokil Initial go up and down completely randomly.

Pair Corralation between British Amer and Rentokil Initial

If you would invest  459.00  in Rentokil Initial plc on November 27, 2024 and sell it today you would earn a total of  0.00  from holding Rentokil Initial plc or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

British American Tobacco  vs.  Rentokil Initial plc

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20-1001020
JavaScript chart by amCharts 3.21.15BTI RKLIF
       Timeline  
British American Tobacco 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, British Amer is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3536373839404142
Rentokil Initial plc 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Rentokil Initial plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
JavaScript chart by amCharts 3.21.15JulSepOctNovDecJanFebAugSep NovDecJanFeb4.555.56

British Amer and Rentokil Initial Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.45-3.33-2.22-1.10.01.122.283.454.615.77 0.050.100.150.20
JavaScript chart by amCharts 3.21.15BTI RKLIF
       Returns  

Pair Trading with British Amer and Rentokil Initial

The main advantage of trading using opposite British Amer and Rentokil Initial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British Amer 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 British American Tobacco 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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