Correlation Between Consolidated Communications and Cintas
Can any of the company-specific risk be diversified away by investing in both Consolidated Communications 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 Consolidated Communications and Cintas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Communications Holdings and Cintas, you can compare the effects of market volatilities on Consolidated Communications 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 Consolidated Communications with a short position of Cintas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Communications and Cintas.
Diversification Opportunities for Consolidated Communications and Cintas
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Consolidated and Cintas is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and Cintas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cintas and Consolidated Communications 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 Consolidated Communications Holdings 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 Consolidated Communications i.e., Consolidated Communications and Cintas go up and down completely randomly.
Pair Corralation between Consolidated Communications and Cintas
Assuming the 90 days horizon Consolidated Communications is expected to generate 1.43 times less return on investment than Cintas. But when comparing it to its historical volatility, Consolidated Communications Holdings is 1.04 times less risky than Cintas. It trades about 0.07 of its potential returns per unit of risk. Cintas is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 11,238 in Cintas on October 4, 2024 and sell it today you would earn a total of 6,497 from holding Cintas or generate 57.81% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 99.7% |
Values | Daily Returns |
Consolidated Communications Ho vs. Cintas
Performance |
Timeline |
Consolidated Communications |
Cintas |
Consolidated Communications and Cintas Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Consolidated Communications and Cintas
The main advantage of trading using opposite Consolidated Communications and Cintas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Communications 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.Consolidated Communications vs. SIVERS SEMICONDUCTORS AB | Consolidated Communications vs. Talanx AG | Consolidated Communications vs. Norsk Hydro ASA | Consolidated Communications vs. Volkswagen AG |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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