Correlation Between Elis SA and RENTOKIL INITIAL

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

By analyzing existing cross correlation between Elis SA and RENTOKIL INITIAL ADR5, you can compare the effects of market volatilities on Elis SA and RENTOKIL INITIAL 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 Elis SA with a short position of RENTOKIL INITIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elis SA and RENTOKIL INITIAL.

Diversification Opportunities for Elis SA and RENTOKIL INITIAL

-0.14

Correlation Coefficient

Elis SA  RENTOKIL INITIAL

Good diversification

The 3 months correlation between Elis and RENTOKIL is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Elis SA and RENTOKIL INITIAL ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RENTOKIL INITIAL ADR5 and Elis SA 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 Elis SA are associated (or correlated) with RENTOKIL INITIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RENTOKIL INITIAL ADR5 has no effect on the direction of Elis SA i.e., Elis SA and RENTOKIL INITIAL go up and down completely randomly.

Pair Corralation between Elis SA and RENTOKIL INITIAL

Assuming the 90 days horizon Elis SA is expected to under-perform the RENTOKIL INITIAL. But the stock apears to be less risky and, when comparing its historical volatility, Elis SA is 1.17 times less risky than RENTOKIL INITIAL. The stock trades about -0.24 of its potential returns per unit of risk. The RENTOKIL INITIAL ADR5 is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,420  in RENTOKIL INITIAL ADR5 on September 23, 2024 and sell it today you would lose (40.00) from holding RENTOKIL INITIAL ADR5 or give up 1.65% of portfolio value over 90 days.

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

Elis SA  vs.  RENTOKIL INITIAL ADR5

Elis SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Elis SA and RENTOKIL INITIAL

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

The idea behind Elis SA and RENTOKIL INITIAL ADR5 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.