Correlation Between Relx PLC and Rentokil Initial
Can any of the company-specific risk be diversified away by investing in both Relx PLC 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 Relx PLC and Rentokil Initial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Relx PLC ADR and Rentokil Initial PLC, you can compare the effects of market volatilities on Relx PLC 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 Relx PLC with a short position of Rentokil Initial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Relx PLC and Rentokil Initial.
Diversification Opportunities for Relx PLC and Rentokil Initial
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Relx and Rentokil is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC ADR 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 Relx PLC 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 Relx PLC ADR 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 Relx PLC i.e., Relx PLC and Rentokil Initial go up and down completely randomly.
Pair Corralation between Relx PLC and Rentokil Initial
Given the investment horizon of 90 days Relx PLC ADR is expected to under-perform the Rentokil Initial. But the stock apears to be less risky and, when comparing its historical volatility, Relx PLC ADR is 1.04 times less risky than Rentokil Initial. The stock trades about -0.07 of its potential returns per unit of risk. The Rentokil Initial PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,555 in Rentokil Initial PLC on August 30, 2024 and sell it today you would earn a total of 16.00 from holding Rentokil Initial PLC or generate 0.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Relx PLC ADR vs. Rentokil Initial PLC
Performance |
| Timeline |
| Relx PLC ADR |
| Rentokil Initial PLC |
Relx PLC and Rentokil Initial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Relx PLC and Rentokil Initial
The main advantage of trading using opposite Relx PLC and Rentokil Initial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Relx PLC 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.| Relx PLC vs. Maximus | Relx PLC vs. CBIZ Inc | Relx PLC vs. First Advantage Corp | Relx PLC vs. Network 1 Technologies |
| Rentokil Initial vs. Cass Information Systems | Rentokil Initial vs. First Advantage Corp | Rentokil Initial vs. CBIZ Inc | Rentokil Initial vs. Civeo Corp |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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