Correlation Between RENTOKIL INITIAL and LABOCANNA

Can any of the company-specific risk be diversified away by investing in both RENTOKIL INITIAL and LABOCANNA 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 LABOCANNA 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 LABOCANNA SA ZY 10, you can compare the effects of market volatilities on RENTOKIL INITIAL and LABOCANNA 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 LABOCANNA. Check out your portfolio center. Please also check ongoing floating volatility patterns of RENTOKIL INITIAL and LABOCANNA.

Diversification Opportunities for RENTOKIL INITIAL and LABOCANNA

-0.63

Correlation Coefficient

RENTOKIL INITIAL  LABOCANNA

Excellent diversification

The 3 months correlation between RENTOKIL and LABOCANNA is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding RENTOKIL INITIAL ADR5 and LABOCANNA SA ZY 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LABOCANNA SA ZY 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 LABOCANNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LABOCANNA SA ZY has no effect on the direction of RENTOKIL INITIAL i.e., RENTOKIL INITIAL and LABOCANNA go up and down completely randomly.

Pair Corralation between RENTOKIL INITIAL and LABOCANNA

Assuming the 90 days horizon RENTOKIL INITIAL ADR5 is expected to generate 1.31 times more return on investment than LABOCANNA. However, RENTOKIL INITIAL is 1.31 times more volatile than LABOCANNA SA ZY 10. It trades about 0.07 of its potential returns per unit of risk. LABOCANNA SA ZY 10 is currently generating about -0.1 per unit of risk. If you would invest  2,140  in RENTOKIL INITIAL ADR5 on September 22, 2024 and sell it today you would earn a total of  240.00  from holding RENTOKIL INITIAL ADR5 or generate 11.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

RENTOKIL INITIAL ADR5  vs.  LABOCANNA SA ZY 10

RENTOKIL INITIAL ADR5

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RENTOKIL INITIAL ADR5 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, RENTOKIL INITIAL reported solid returns over the last few months and may actually be approaching a breakup point.

LABOCANNA SA ZY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LABOCANNA SA ZY 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic 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.

Pair Trading with RENTOKIL INITIAL and LABOCANNA

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

The idea behind RENTOKIL INITIAL ADR5 and LABOCANNA SA ZY 10 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .