Correlation Between Global Payments and Rentokil Initial
Can any of the company-specific risk be diversified away by investing in both Global Payments 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 Global Payments and Rentokil Initial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Payments and Rentokil Initial plc, you can compare the effects of market volatilities on Global Payments 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 Global Payments with a short position of Rentokil Initial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Payments and Rentokil Initial.
Diversification Opportunities for Global Payments and Rentokil Initial
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Global and Rentokil is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Global Payments 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 Global Payments 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 Global Payments 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 Global Payments i.e., Global Payments and Rentokil Initial go up and down completely randomly.
Pair Corralation between Global Payments and Rentokil Initial
Considering the 90-day investment horizon Global Payments is expected to under-perform the Rentokil Initial. But the stock apears to be less risky and, when comparing its historical volatility, Global Payments is 1.87 times less risky than Rentokil Initial. The stock trades about -0.01 of its potential returns per unit of risk. The Rentokil Initial plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 464.00 in Rentokil Initial plc on August 29, 2024 and sell it today you would earn a total of 56.00 from holding Rentokil Initial plc or generate 12.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 93.09% |
| Values | Daily Returns |
Global Payments vs. Rentokil Initial plc
Performance |
| Timeline |
| Global Payments |
| Rentokil Initial plc |
Global Payments and Rentokil Initial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Payments and Rentokil Initial
The main advantage of trading using opposite Global Payments and Rentokil Initial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Payments 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.| Global Payments vs. Copart Inc | Global Payments vs. ABM Industries Incorporated | Global Payments vs. Thomson Reuters Corp | Global Payments vs. Aramark Holdings |
| Rentokil Initial vs. Maximus | Rentokil Initial vs. CBIZ Inc | Rentokil Initial vs. First Advantage Corp | 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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