Correlation Between Global Payments and Cintas

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

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

Diversification Opportunities for Global Payments and Cintas

-0.28

Correlation Coefficient

Global Payments  Cintas

Very good diversification

The 3 months correlation between Global and Cintas is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Global Payments and Cintas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cintas and Global Payments 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 Global Payments 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 Global Payments i.e., Global Payments and Cintas go up and down completely randomly.

Pair Corralation between Global Payments and Cintas

Considering the 90-day investment horizon Global Payments is expected to under-perform the Cintas. In addition to that, Global Payments is 1.16 times more volatile than Cintas. It trades about -0.11 of its total potential returns per unit of risk. Cintas is currently generating about 0.12 per unit of volatility. If you would invest  18,333  in Cintas on December 28, 2024 and sell it today you would earn a total of  1,989  from holding Cintas or generate 10.85% return on investment over 90 days.

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

Global Payments  vs.  Cintas

Global Payments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Payments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Cintas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cintas are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Cintas may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Global Payments and Cintas

The main advantage of trading using opposite Global Payments and Cintas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Payments 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.

The idea behind Global Payments and Cintas 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.