Correlation Between Rentokil Initial and AZZ Incorporated

Can any of the company-specific risk be diversified away by investing in both Rentokil Initial and AZZ Incorporated 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 AZZ Incorporated 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 AZZ Incorporated, you can compare the effects of market volatilities on Rentokil Initial and AZZ Incorporated 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 AZZ Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rentokil Initial and AZZ Incorporated.

Diversification Opportunities for Rentokil Initial and AZZ Incorporated

0.43

Correlation Coefficient

Rentokil Initial  AZZ Incorporated

Very weak diversification

The 3 months correlation between Rentokil and AZZ is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Rentokil Initial PLC and AZZ Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AZZ Incorporated 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 AZZ Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AZZ Incorporated has no effect on the direction of Rentokil Initial i.e., Rentokil Initial and AZZ Incorporated go up and down completely randomly.

Pair Corralation between Rentokil Initial and AZZ Incorporated

Considering the 90-day investment horizon Rentokil Initial PLC is expected to under-perform the AZZ Incorporated. In addition to that, Rentokil Initial is 1.14 times more volatile than AZZ Incorporated. It trades about -0.05 of its total potential returns per unit of risk. AZZ Incorporated is currently generating about 0.06 per unit of volatility. If you would invest  8,117  in AZZ Incorporated on December 28, 2024 and sell it today you would earn a total of  459.00  from holding AZZ Incorporated or generate 5.65% return on investment over 90 days.

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

Rentokil Initial PLC  vs.  AZZ Incorporated

Rentokil Initial PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rentokil Initial PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

AZZ Incorporated

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AZZ Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, AZZ Incorporated may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Rentokil Initial and AZZ Incorporated

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

The idea behind Rentokil Initial PLC and AZZ Incorporated 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.