Correlation Between Babcock Wilcox and Rentokil Initial
Can any of the company-specific risk be diversified away by investing in both Babcock Wilcox 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 Babcock Wilcox and Rentokil Initial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Babcock Wilcox Enterprises and Rentokil Initial PLC, you can compare the effects of market volatilities on Babcock Wilcox 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 Babcock Wilcox with a short position of Rentokil Initial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Babcock Wilcox and Rentokil Initial.
Diversification Opportunities for Babcock Wilcox and Rentokil Initial
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Babcock and Rentokil is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Babcock Wilcox Enterprises 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 Babcock Wilcox 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 Babcock Wilcox Enterprises 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 Babcock Wilcox i.e., Babcock Wilcox and Rentokil Initial go up and down completely randomly.
Pair Corralation between Babcock Wilcox and Rentokil Initial
Allowing for the 90-day total investment horizon Babcock Wilcox Enterprises is expected to under-perform the Rentokil Initial. In addition to that, Babcock Wilcox is 5.15 times more volatile than Rentokil Initial PLC. It trades about -0.1 of its total potential returns per unit of risk. Rentokil Initial PLC is currently generating about 0.14 per unit of volatility. If you would invest 2,481 in Rentokil Initial PLC on August 24, 2024 and sell it today you would earn a total of 109.00 from holding Rentokil Initial PLC or generate 4.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Babcock Wilcox Enterprises vs. Rentokil Initial PLC
Performance |
| Timeline |
| Babcock Wilcox Enter |
| Rentokil Initial PLC |
Babcock Wilcox and Rentokil Initial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Babcock Wilcox and Rentokil Initial
The main advantage of trading using opposite Babcock Wilcox and Rentokil Initial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Babcock Wilcox 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.| Babcock Wilcox vs. Enerpac Tool Group | Babcock Wilcox vs. Gorman Rupp | Babcock Wilcox vs. Crane Company | Babcock Wilcox vs. Franklin Electric Co |
| Rentokil Initial vs. First Advantage Corp | Rentokil Initial vs. Civeo Corp | Rentokil Initial vs. Performant Financial | Rentokil Initial vs. Network 1 Technologies |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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