Correlation Between Rentokil Initial and CRA International

Can any of the company-specific risk be diversified away by investing in both Rentokil Initial and CRA International 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 CRA International 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 CRA International, you can compare the effects of market volatilities on Rentokil Initial and CRA International 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 CRA International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rentokil Initial and CRA International.

Diversification Opportunities for Rentokil Initial and CRA International

-0.39

Correlation Coefficient

Rentokil Initial  CRA International

Very good diversification

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

Pair Corralation between Rentokil Initial and CRA International

Considering the 90-day investment horizon Rentokil Initial PLC is expected to under-perform the CRA International. In addition to that, Rentokil Initial is 1.47 times more volatile than CRA International. It trades about -0.09 of its total potential returns per unit of risk. CRA International is currently generating about 0.14 per unit of volatility. If you would invest  16,246  in CRA International on September 1, 2024 and sell it today you would earn a total of  3,257  from holding CRA International or generate 20.05% return on investment over 90 days.

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

Rentokil Initial PLC  vs.  CRA International

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 inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

CRA International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CRA International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CRA International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rentokil Initial and CRA International

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

The idea behind Rentokil Initial PLC and CRA International 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 CEOs Directory module to screen CEOs from public companies around the world.