Correlation Between Cintas and Latch

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

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

Diversification Opportunities for Cintas and Latch

-0.51

Correlation Coefficient

Cintas  Latch

Excellent diversification

The 3 months correlation between Cintas and Latch is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Cintas and Latch Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latch Inc and Cintas 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 Cintas are associated (or correlated) with Latch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latch Inc has no effect on the direction of Cintas i.e., Cintas and Latch go up and down completely randomly.

Pair Corralation between Cintas and Latch

Given the investment horizon of 90 days Cintas is expected to generate 21.3 times less return on investment than Latch. But when comparing it to its historical volatility, Cintas is 15.9 times less risky than Latch. It trades about 0.1 of its potential returns per unit of risk. Latch Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7.13  in Latch Inc on October 26, 2024 and sell it today you would earn a total of  9.87  from holding Latch Inc or generate 138.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	23.48%
Values	Daily Returns

Cintas  vs.  Latch Inc

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. In spite of comparatively stable basic indicators, Cintas is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Latch Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cintas and Latch

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

The idea behind Cintas and Latch Inc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.