Correlation Between Cintas and Dolby Laboratories
Can any of the company-specific risk be diversified away by investing in both Cintas and Dolby Laboratories 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 Cintas and Dolby Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cintas and Dolby Laboratories, you can compare the effects of market volatilities on Cintas and Dolby Laboratories 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 Cintas with a short position of Dolby Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cintas and Dolby Laboratories.
Diversification Opportunities for Cintas and Dolby Laboratories
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cintas and Dolby is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cintas and Dolby Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolby Laboratories and Cintas 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 Cintas are associated (or correlated) with Dolby Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolby Laboratories has no effect on the direction of Cintas i.e., Cintas and Dolby Laboratories go up and down completely randomly.
Pair Corralation between Cintas and Dolby Laboratories
Given the investment horizon of 90 days Cintas is expected to generate 0.37 times more return on investment than Dolby Laboratories. However, Cintas is 2.67 times less risky than Dolby Laboratories. It trades about 0.34 of its potential returns per unit of risk. Dolby Laboratories is currently generating about 0.11 per unit of risk. If you would invest 20,544 in Cintas on September 1, 2024 and sell it today you would earn a total of 2,035 from holding Cintas or generate 9.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cintas vs. Dolby Laboratories
Performance |
| Timeline |
| Cintas |
| Dolby Laboratories |
Cintas and Dolby Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cintas and Dolby Laboratories
The main advantage of trading using opposite Cintas and Dolby Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cintas position performs unexpectedly, Dolby Laboratories 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 Dolby Laboratories will offset losses from the drop in Dolby Laboratories' long position.| Cintas vs. ABM Industries Incorporated | Cintas vs. Copart Inc | Cintas vs. Dolby Laboratories | Cintas vs. Relx PLC ADR |
| Dolby Laboratories vs. Maximus | Dolby Laboratories vs. Network 1 Technologies | Dolby Laboratories vs. First Advantage Corp | Dolby Laboratories vs. BrightView Holdings |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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