Correlation Between Cintas and Global Payments
Can any of the company-specific risk be diversified away by investing in both Cintas and Global Payments 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 Global Payments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cintas and Global Payments, you can compare the effects of market volatilities on Cintas and Global Payments 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 Global Payments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cintas and Global Payments.
Diversification Opportunities for Cintas and Global Payments
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Cintas and Global is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Cintas and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments 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 Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of Cintas i.e., Cintas and Global Payments go up and down completely randomly.
Pair Corralation between Cintas and Global Payments
Given the investment horizon of 90 days Cintas is expected to generate 0.81 times more return on investment than Global Payments. However, Cintas is 1.24 times less risky than Global Payments. It trades about 0.28 of its potential returns per unit of risk. Global Payments is currently generating about -0.11 per unit of risk. If you would invest 18,712 in Cintas on October 23, 2024 and sell it today you would earn a total of 1,119 from holding Cintas or generate 5.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cintas vs. Global Payments
Performance |
| Timeline |
| Cintas |
| Global Payments |
Cintas and Global Payments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cintas and Global Payments
The main advantage of trading using opposite Cintas and Global Payments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cintas position performs unexpectedly, Global Payments 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 Global Payments will offset losses from the drop in Global Payments' long position.| Cintas vs. ABM Industries Incorporated | Cintas vs. Copart Inc | Cintas vs. Dolby Laboratories | Cintas vs. Relx PLC ADR |
| Global Payments vs. Copart Inc | Global Payments vs. ABM Industries Incorporated | Global Payments vs. Thomson Reuters Corp | Global Payments vs. Aramark 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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