Correlation Between RENTOKIL INITIAL and Lifeway Foods
Can any of the company-specific risk be diversified away by investing in both RENTOKIL INITIAL and Lifeway Foods 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 RENTOKIL INITIAL and Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RENTOKIL INITIAL ADR5 and Lifeway Foods, you can compare the effects of market volatilities on RENTOKIL INITIAL and Lifeway Foods 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 RENTOKIL INITIAL with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of RENTOKIL INITIAL and Lifeway Foods.
Diversification Opportunities for RENTOKIL INITIAL and Lifeway Foods
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between RENTOKIL and Lifeway is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding RENTOKIL INITIAL ADR5 and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and RENTOKIL INITIAL 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 RENTOKIL INITIAL ADR5 are associated (or correlated) with Lifeway Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeway Foods has no effect on the direction of RENTOKIL INITIAL i.e., RENTOKIL INITIAL and Lifeway Foods go up and down completely randomly.
Pair Corralation between RENTOKIL INITIAL and Lifeway Foods
Assuming the 90 days horizon RENTOKIL INITIAL ADR5 is expected to under-perform the Lifeway Foods. But the stock apears to be less risky and, when comparing its historical volatility, RENTOKIL INITIAL ADR5 is 2.25 times less risky than Lifeway Foods. The stock trades about -0.06 of its potential returns per unit of risk. The Lifeway Foods is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,120 in Lifeway Foods on October 11, 2024 and sell it today you would earn a total of 100.00 from holding Lifeway Foods or generate 4.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RENTOKIL INITIAL ADR5 vs. Lifeway Foods
Performance |
| Timeline |
| RENTOKIL INITIAL ADR5 |
| Lifeway Foods |
RENTOKIL INITIAL and Lifeway Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RENTOKIL INITIAL and Lifeway Foods
The main advantage of trading using opposite RENTOKIL INITIAL and Lifeway Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RENTOKIL INITIAL position performs unexpectedly, Lifeway Foods 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 Lifeway Foods will offset losses from the drop in Lifeway Foods' long position.| RENTOKIL INITIAL vs. Lifeway Foods | RENTOKIL INITIAL vs. Fair Isaac Corp | RENTOKIL INITIAL vs. Westinghouse Air Brake | RENTOKIL INITIAL vs. BG Foods |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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