Correlation Between Sodexo PK and Rentokil Initial
Can any of the company-specific risk be diversified away by investing in both Sodexo PK 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 Sodexo PK and Rentokil Initial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sodexo PK and Rentokil Initial plc, you can compare the effects of market volatilities on Sodexo PK 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 Sodexo PK with a short position of Rentokil Initial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sodexo PK and Rentokil Initial.
Diversification Opportunities for Sodexo PK and Rentokil Initial
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sodexo and Rentokil is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sodexo PK 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 Sodexo PK 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 Sodexo PK 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 Sodexo PK i.e., Sodexo PK and Rentokil Initial go up and down completely randomly.
Pair Corralation between Sodexo PK and Rentokil Initial
Assuming the 90 days horizon Sodexo PK is expected to under-perform the Rentokil Initial. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sodexo PK is 1.82 times less risky than Rentokil Initial. The pink sheet trades about -0.37 of its potential returns per unit of risk. The Rentokil Initial plc is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 495.00 in Rentokil Initial plc on October 23, 2024 and sell it today you would lose (36.00) from holding Rentokil Initial plc or give up 7.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Sodexo PK vs. Rentokil Initial plc
Performance |
| Timeline |
| Sodexo PK |
| Rentokil Initial plc |
Sodexo PK and Rentokil Initial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sodexo PK and Rentokil Initial
The main advantage of trading using opposite Sodexo PK and Rentokil Initial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sodexo PK 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.| Sodexo PK vs. Alfa Laval AB | Sodexo PK vs. Randstad Holdings NV | Sodexo PK vs. Sandvik AB ADR | Sodexo PK vs. Sonova Holding AG |
| 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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