Correlation Between Sodexo PK and RB Global

Can any of the company-specific risk be diversified away by investing in both Sodexo PK and RB Global 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 Sodexo PK and RB Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sodexo PK and RB Global, you can compare the effects of market volatilities on Sodexo PK and RB Global 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 Sodexo PK with a short position of RB Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sodexo PK and RB Global.

Diversification Opportunities for Sodexo PK and RB Global

0.27

Correlation Coefficient

Sodexo PK  RB Global

Modest diversification

The 3 months correlation between Sodexo and RBA is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sodexo PK and RB Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RB Global and Sodexo PK 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 Sodexo PK are associated (or correlated) with RB Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RB Global has no effect on the direction of Sodexo PK i.e., Sodexo PK and RB Global go up and down completely randomly.

Pair Corralation between Sodexo PK and RB Global

Assuming the 90 days horizon Sodexo PK is expected to under-perform the RB Global. In addition to that, Sodexo PK is 1.12 times more volatile than RB Global. It trades about -0.04 of its total potential returns per unit of risk. RB Global is currently generating about 0.17 per unit of volatility. If you would invest  8,396  in RB Global on September 4, 2024 and sell it today you would earn a total of  1,318  from holding RB Global or generate 15.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sodexo PK  vs.  RB Global

Sodexo PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sodexo PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sodexo PK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RB Global

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RB Global are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, RB Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sodexo PK and RB Global

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

The idea behind Sodexo PK and RB Global 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.