Correlation Between Rentokil Initial and Wildpack Beverage

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

By analyzing existing cross correlation between Rentokil Initial plc and Wildpack Beverage, you can compare the effects of market volatilities on Rentokil Initial and Wildpack Beverage 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 Wildpack Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rentokil Initial and Wildpack Beverage.

Diversification Opportunities for Rentokil Initial and Wildpack Beverage

-0.39

Correlation Coefficient

Rentokil Initial  Wildpack Beverage

Very good diversification

The 3 months correlation between Rentokil and Wildpack is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Rentokil Initial plc and Wildpack Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wildpack Beverage 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 plc are associated (or correlated) with Wildpack Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wildpack Beverage has no effect on the direction of Rentokil Initial i.e., Rentokil Initial and Wildpack Beverage go up and down completely randomly.

Pair Corralation between Rentokil Initial and Wildpack Beverage

Assuming the 90 days horizon Rentokil Initial plc is expected to under-perform the Wildpack Beverage. But the pink sheet apears to be less risky and, when comparing its historical volatility, Rentokil Initial plc is 5.37 times less risky than Wildpack Beverage. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Wildpack Beverage is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1.24  in Wildpack Beverage on September 13, 2024 and sell it today you would lose (0.56) from holding Wildpack Beverage or give up 45.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Rentokil Initial plc  vs.  Wildpack Beverage

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. Despite uncertain performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Wildpack Beverage

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wildpack Beverage are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Wildpack Beverage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rentokil Initial and Wildpack Beverage

The main advantage of trading using opposite Rentokil Initial and Wildpack Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rentokil Initial position performs unexpectedly, Wildpack Beverage 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 Wildpack Beverage will offset losses from the drop in Wildpack Beverage's long position.

The idea behind Rentokil Initial plc and Wildpack Beverage 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.