Correlation Between CompX International and Rentokil Initial

Can any of the company-specific risk be diversified away by investing in both CompX International 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 CompX International and Rentokil Initial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CompX International and Rentokil Initial PLC, you can compare the effects of market volatilities on CompX International 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 CompX International with a short position of Rentokil Initial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CompX International and Rentokil Initial.

Diversification Opportunities for CompX International and Rentokil Initial

-0.33

Correlation Coefficient

CompX International  Rentokil Initial

Very good diversification

The 3 months correlation between CompX and Rentokil is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding CompX International 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 CompX International 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 CompX International 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 CompX International i.e., CompX International and Rentokil Initial go up and down completely randomly.

Pair Corralation between CompX International and Rentokil Initial

Considering the 90-day investment horizon CompX International is expected to generate 1.26 times more return on investment than Rentokil Initial. However, CompX International is 1.26 times more volatile than Rentokil Initial PLC. It trades about 0.01 of its potential returns per unit of risk. Rentokil Initial PLC is currently generating about -0.09 per unit of risk. If you would invest  2,806  in CompX International on September 2, 2024 and sell it today you would lose (45.00) from holding CompX International or give up 1.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CompX International  vs.  Rentokil Initial PLC

CompX International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CompX International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, CompX International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Rentokil Initial PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rentokil Initial PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with CompX International and Rentokil Initial

The main advantage of trading using opposite CompX International and Rentokil Initial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CompX International 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.

The idea behind CompX International and Rentokil Initial PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.