Correlation Between Cintas and System1

Can any of the company-specific risk be diversified away by investing in both Cintas and System1 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 System1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cintas and System1, you can compare the effects of market volatilities on Cintas and System1 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 System1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cintas and System1.

Diversification Opportunities for Cintas and System1

0.58

Correlation Coefficient

Cintas  System1

Very weak diversification

The 3 months correlation between Cintas and System1 is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Cintas and System1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System1 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 System1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System1 has no effect on the direction of Cintas i.e., Cintas and System1 go up and down completely randomly.

Pair Corralation between Cintas and System1

Given the investment horizon of 90 days Cintas is expected to generate 0.25 times more return on investment than System1. However, Cintas is 4.0 times less risky than System1. It trades about 0.06 of its potential returns per unit of risk. System1 is currently generating about -0.04 per unit of risk. If you would invest  16,915  in Cintas on October 25, 2024 and sell it today you would earn a total of  2,987  from holding Cintas or generate 17.66% return on investment over 90 days.

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

Cintas  vs.  System1

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.

System1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days System1 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Cintas and System1

The main advantage of trading using opposite Cintas and System1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cintas position performs unexpectedly, System1 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 System1 will offset losses from the drop in System1's long position.

The idea behind Cintas and System1 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.