Correlation Between Citigroup and Rentokil Initial

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

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

Diversification Opportunities for Citigroup and Rentokil Initial

0.34

Correlation Coefficient

Citigroup  Rentokil Initial

Weak diversification

The 3 months correlation between Citigroup and Rentokil is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Rentokil Initial plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rentokil Initial plc and Citigroup 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 Citigroup 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 plc has no effect on the direction of Citigroup i.e., Citigroup and Rentokil Initial go up and down completely randomly.

Pair Corralation between Citigroup and Rentokil Initial

Taking into account the 90-day investment horizon Citigroup is expected to generate 6.62 times less return on investment than Rentokil Initial. But when comparing it to its historical volatility, Citigroup is 1.4 times less risky than Rentokil Initial. It trades about 0.01 of its potential returns per unit of risk. Rentokil Initial plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  430.00  in Rentokil Initial plc on December 30, 2024 and sell it today you would earn a total of  39.00  from holding Rentokil Initial plc or generate 9.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.71%
Values	Daily Returns

Citigroup  vs.  Rentokil Initial plc

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Rentokil Initial plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rentokil Initial plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, Rentokil Initial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Citigroup and Rentokil Initial

The main advantage of trading using opposite Citigroup and Rentokil Initial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup and Rentokil Initial 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.