Correlation Between Rentokil Initial and RB Global

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

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

Diversification Opportunities for Rentokil Initial and RB Global

0.71

Correlation Coefficient

Rentokil Initial  RB Global

Poor diversification

The 3 months correlation between Rentokil and RBA is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Rentokil Initial plc and RB Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RB Global and Rentokil Initial 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 Rentokil Initial plc are associated (or correlated) with RB Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RB Global has no effect on the direction of Rentokil Initial i.e., Rentokil Initial and RB Global go up and down completely randomly.

Pair Corralation between Rentokil Initial and RB Global

Assuming the 90 days horizon Rentokil Initial plc is expected to under-perform the RB Global. In addition to that, Rentokil Initial is 2.1 times more volatile than RB Global. It trades about 0.0 of its total potential returns per unit of risk. RB Global is currently generating about 0.08 per unit of volatility. If you would invest  7,320  in RB Global on September 24, 2024 and sell it today you would earn a total of  1,731  from holding RB Global or generate 23.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.19%
Values	Daily Returns

Rentokil Initial plc  vs.  RB Global

Rentokil Initial plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rentokil Initial plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, Rentokil Initial reported solid returns over the last few months and may actually be approaching a breakup point.

RB Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RB Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, RB Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rentokil Initial and RB Global

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

The idea behind Rentokil Initial plc and RB Global 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.