Correlation Between Rollins and Carriage Services

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

By analyzing existing cross correlation between Rollins and Carriage Services, you can compare the effects of market volatilities on Rollins and Carriage Services 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 Carriage Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rollins and Carriage Services.

Diversification Opportunities for Rollins and Carriage Services

-0.16

Correlation Coefficient

Rollins  Carriage Services

Good diversification

The 3 months correlation between Rollins and Carriage is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Rollins and Carriage Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carriage Services 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 Carriage Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carriage Services has no effect on the direction of Rollins i.e., Rollins and Carriage Services go up and down completely randomly.

Pair Corralation between Rollins and Carriage Services

Considering the 90-day investment horizon Rollins is expected to generate 0.85 times more return on investment than Carriage Services. However, Rollins is 1.18 times less risky than Carriage Services. It trades about 0.2 of its potential returns per unit of risk. Carriage Services is currently generating about -0.02 per unit of risk. If you would invest  4,626  in Rollins on December 29, 2024 and sell it today you would earn a total of  680.00  from holding Rollins or generate 14.7% return on investment over 90 days.

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

Rollins  vs.  Carriage Services

Rollins

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rollins are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Rollins disclosed solid returns over the last few months and may actually be approaching a breakup point.

Carriage Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carriage Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Carriage Services is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Rollins and Carriage Services

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

The idea behind Rollins and Carriage Services 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.