Correlation Between Mistras and Rentokil Initial

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

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

Diversification Opportunities for Mistras and Rentokil Initial

-0.78

Correlation Coefficient

Mistras  Rentokil Initial

Pay attention - limited upside

The 3 months correlation between Mistras and Rentokil is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Mistras Group and Rentokil Initial PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rentokil Initial PLC and Mistras 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 Mistras Group 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 PLC has no effect on the direction of Mistras i.e., Mistras and Rentokil Initial go up and down completely randomly.

Pair Corralation between Mistras and Rentokil Initial

Allowing for the 90-day total investment horizon Mistras Group is expected to generate 1.02 times more return on investment than Rentokil Initial. However, Mistras is 1.02 times more volatile than Rentokil Initial PLC. It trades about 0.08 of its potential returns per unit of risk. Rentokil Initial PLC is currently generating about 0.01 per unit of risk. If you would invest  533.00  in Mistras Group on September 19, 2024 and sell it today you would earn a total of  359.00  from holding Mistras Group or generate 67.35% return on investment over 90 days.

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

Mistras Group  vs.  Rentokil Initial PLC

Mistras Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mistras Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Rentokil Initial PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rentokil Initial PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Rentokil Initial is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Mistras and Rentokil Initial

The main advantage of trading using opposite Mistras and Rentokil Initial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mistras 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 Mistras Group and Rentokil Initial PLC 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.