Correlation Between Rentokil Initial and Relx PLC

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

Diversification Opportunities for Rentokil Initial and Relx PLC

-0.24

Correlation Coefficient

Rentokil Initial  Relx PLC

Very good diversification

The 3 months correlation between Rentokil and Relx is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Rentokil Initial PLC and Relx PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relx PLC 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 Relx PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relx PLC has no effect on the direction of Rentokil Initial i.e., Rentokil Initial and Relx PLC go up and down completely randomly.

Pair Corralation between Rentokil Initial and Relx PLC

Considering the 90-day investment horizon Rentokil Initial PLC is expected to under-perform the Relx PLC. But the stock apears to be less risky and, when comparing its historical volatility, Rentokil Initial PLC is 1.09 times less risky than Relx PLC. The stock trades about 0.0 of its potential returns per unit of risk. The Relx PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,645  in Relx PLC on September 14, 2024 and sell it today you would earn a total of  2,120  from holding Relx PLC or generate 80.15% 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.  Relx PLC

Rentokil Initial PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rentokil Initial PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Rentokil Initial is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Relx PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Relx PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Relx PLC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rentokil Initial and Relx PLC

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

The idea behind Rentokil Initial PLC and Relx 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.