Correlation Between Highlight Communications and RENTOKIL INITIAL
Can any of the company-specific risk be diversified away by investing in both Highlight Communications 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 Highlight Communications and RENTOKIL INITIAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlight Communications AG and RENTOKIL INITIAL ADR5, you can compare the effects of market volatilities on Highlight Communications 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 Highlight Communications with a short position of RENTOKIL INITIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and RENTOKIL INITIAL.
Diversification Opportunities for Highlight Communications and RENTOKIL INITIAL
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Highlight and RENTOKIL is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and RENTOKIL INITIAL ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RENTOKIL INITIAL ADR5 and Highlight Communications 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 Highlight Communications AG 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 ADR5 has no effect on the direction of Highlight Communications i.e., Highlight Communications and RENTOKIL INITIAL go up and down completely randomly.
Pair Corralation between Highlight Communications and RENTOKIL INITIAL
Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 1.61 times more return on investment than RENTOKIL INITIAL. However, Highlight Communications is 1.61 times more volatile than RENTOKIL INITIAL ADR5. It trades about 0.21 of its potential returns per unit of risk. RENTOKIL INITIAL ADR5 is currently generating about -0.01 per unit of risk. If you would invest 133.00 in Highlight Communications AG on November 5, 2024 and sell it today you would earn a total of 22.00 from holding Highlight Communications AG or generate 16.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highlight Communications AG vs. RENTOKIL INITIAL ADR5
Performance |
| Timeline |
| Highlight Communications |
| RENTOKIL INITIAL ADR5 |
Highlight Communications and RENTOKIL INITIAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highlight Communications and RENTOKIL INITIAL
The main advantage of trading using opposite Highlight Communications and RENTOKIL INITIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications 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.| Highlight Communications vs. SPARTAN STORES | Highlight Communications vs. H2O Retailing | Highlight Communications vs. UNIVMUSIC GRPADR050 | Highlight Communications vs. URBAN OUTFITTERS |
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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