Correlation Between Rollins and Global Payments

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

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

Diversification Opportunities for Rollins and Global Payments

-0.23

Correlation Coefficient

Rollins  Global Payments

Very good diversification

The 3 months correlation between Rollins and Global is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Rollins and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments and Rollins 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 Rollins are associated (or correlated) with Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of Rollins i.e., Rollins and Global Payments go up and down completely randomly.

Pair Corralation between Rollins and Global Payments

Assuming the 90 days horizon Rollins is expected to generate 0.83 times more return on investment than Global Payments. However, Rollins is 1.2 times less risky than Global Payments. It trades about 0.08 of its potential returns per unit of risk. Global Payments is currently generating about -0.14 per unit of risk. If you would invest  4,705  in Rollins on November 30, 2024 and sell it today you would earn a total of  267.00  from holding Rollins or generate 5.67% return on investment over 90 days.

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

Rollins  vs.  Global Payments

Rollins

Risk-Adjusted Performance

Modest

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

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Rollins and Global Payments

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

The idea behind Rollins and Global Payments 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.