Correlation Between JOHNSON SVC and Cintas

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

By analyzing existing cross correlation between JOHNSON SVC LS 10 and Cintas, you can compare the effects of market volatilities on JOHNSON SVC and Cintas 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 JOHNSON SVC with a short position of Cintas. Check out your portfolio center. Please also check ongoing floating volatility patterns of JOHNSON SVC and Cintas.

Diversification Opportunities for JOHNSON SVC and Cintas

-0.56

Correlation Coefficient

JOHNSON SVC  Cintas

Excellent diversification

The 3 months correlation between JOHNSON and Cintas is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding JOHNSON SVC LS 10 and Cintas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cintas and JOHNSON SVC 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 JOHNSON SVC LS 10 are associated (or correlated) with Cintas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cintas has no effect on the direction of JOHNSON SVC i.e., JOHNSON SVC and Cintas go up and down completely randomly.

Pair Corralation between JOHNSON SVC and Cintas

Assuming the 90 days horizon JOHNSON SVC LS 10 is expected to under-perform the Cintas. In addition to that, JOHNSON SVC is 1.82 times more volatile than Cintas. It trades about -0.02 of its total potential returns per unit of risk. Cintas is currently generating about 0.04 per unit of volatility. If you would invest  16,537  in Cintas on September 22, 2024 and sell it today you would earn a total of  1,313  from holding Cintas or generate 7.94% return on investment over 90 days.

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

JOHNSON SVC LS 10  vs.  Cintas

JOHNSON SVC LS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JOHNSON SVC LS 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.

Cintas

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with JOHNSON SVC and Cintas

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

The idea behind JOHNSON SVC LS 10 and Cintas 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.