Correlation Between Carriage Services and Rollins

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

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

Diversification Opportunities for Carriage Services and Rollins

-0.16

Correlation Coefficient

Carriage Services  Rollins

Good diversification

The 3 months correlation between Carriage and Rollins is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Carriage Services and Rollins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rollins and Carriage Services 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 Carriage Services are associated (or correlated) with Rollins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rollins has no effect on the direction of Carriage Services i.e., Carriage Services and Rollins go up and down completely randomly.

Pair Corralation between Carriage Services and Rollins

Considering the 90-day investment horizon Carriage Services is expected to under-perform the Rollins. In addition to that, Carriage Services is 1.18 times more volatile than Rollins. It trades about -0.02 of its total potential returns per unit of risk. Rollins is currently generating about 0.2 per unit of volatility. If you would invest  4,626  in Rollins on December 29, 2024 and sell it today you would earn a total of  680.00  from holding Rollins or generate 14.7% return on investment over 90 days.

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

Carriage Services  vs.  Rollins

Carriage Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carriage Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Carriage Services is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Rollins

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rollins are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Rollins disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carriage Services and Rollins

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

The idea behind Carriage Services and Rollins 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.