Correlation Between FORWARD AIR and RENTOKIL INITIAL

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

By analyzing existing cross correlation between FORWARD AIR P and RENTOKIL INITIAL ADR5, you can compare the effects of market volatilities on FORWARD AIR 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 FORWARD AIR with a short position of RENTOKIL INITIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of FORWARD AIR and RENTOKIL INITIAL.

Diversification Opportunities for FORWARD AIR and RENTOKIL INITIAL

-0.17

Correlation Coefficient

FORWARD AIR  RENTOKIL INITIAL

Good diversification

The 3 months correlation between FORWARD and RENTOKIL is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding FORWARD AIR P and RENTOKIL INITIAL ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RENTOKIL INITIAL ADR5 and FORWARD AIR 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 FORWARD AIR P 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 ADR5 has no effect on the direction of FORWARD AIR i.e., FORWARD AIR and RENTOKIL INITIAL go up and down completely randomly.

Pair Corralation between FORWARD AIR and RENTOKIL INITIAL

Assuming the 90 days horizon FORWARD AIR is expected to generate 5.45 times less return on investment than RENTOKIL INITIAL. In addition to that, FORWARD AIR is 1.49 times more volatile than RENTOKIL INITIAL ADR5. It trades about 0.01 of its total potential returns per unit of risk. RENTOKIL INITIAL ADR5 is currently generating about 0.07 per unit of volatility. If you would invest  2,140  in RENTOKIL INITIAL ADR5 on October 6, 2024 and sell it today you would earn a total of  240.00  from holding RENTOKIL INITIAL ADR5 or generate 11.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

FORWARD AIR P  vs.  RENTOKIL INITIAL ADR5

FORWARD AIR P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FORWARD AIR P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FORWARD AIR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

RENTOKIL INITIAL ADR5

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RENTOKIL INITIAL ADR5 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, RENTOKIL INITIAL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FORWARD AIR and RENTOKIL INITIAL

The main advantage of trading using opposite FORWARD AIR and RENTOKIL INITIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FORWARD AIR 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 FORWARD AIR P and RENTOKIL INITIAL ADR5 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.