Correlation Between Rollins and Mister Car

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

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

Diversification Opportunities for Rollins and Mister Car

0.81

Correlation Coefficient

Rollins  Mister Car

Very poor diversification

The 3 months correlation between Rollins and Mister is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Rollins and Mister Car Wash, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mister Car Wash, 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 Mister Car. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mister Car Wash, has no effect on the direction of Rollins i.e., Rollins and Mister Car go up and down completely randomly.

Pair Corralation between Rollins and Mister Car

Considering the 90-day investment horizon Rollins is expected to generate 0.5 times more return on investment than Mister Car. However, Rollins is 1.99 times less risky than Mister Car. It trades about 0.2 of its potential returns per unit of risk. Mister Car Wash, is currently generating about 0.08 per unit of risk. If you would invest  4,626  in Rollins on December 28, 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 Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Rollins  vs.  Mister Car Wash,

Rollins

Risk-Adjusted Performance

Solid

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.

Mister Car Wash,

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mister Car Wash, are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Mister Car may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Rollins and Mister Car

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

The idea behind Rollins and Mister Car Wash, 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.