Correlation Between Rentokil Initial and Professional Diversity

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

Diversification Opportunities for Rentokil Initial and Professional Diversity

0.37

Correlation Coefficient

Rentokil Initial  Professional Diversity

Weak diversification

The 3 months correlation between Rentokil and Professional is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Rentokil Initial PLC and Professional Diversity Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Professional Diversity 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 Professional Diversity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Professional Diversity has no effect on the direction of Rentokil Initial i.e., Rentokil Initial and Professional Diversity go up and down completely randomly.

Pair Corralation between Rentokil Initial and Professional Diversity

Considering the 90-day investment horizon Rentokil Initial PLC is expected to generate 0.22 times more return on investment than Professional Diversity. However, Rentokil Initial PLC is 4.5 times less risky than Professional Diversity. It trades about 0.03 of its potential returns per unit of risk. Professional Diversity Network is currently generating about -0.15 per unit of risk. If you would invest  2,554  in Rentokil Initial PLC on November 29, 2024 and sell it today you would earn a total of  41.00  from holding Rentokil Initial PLC or generate 1.61% return on investment over 90 days.

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

Rentokil Initial PLC  vs.  Professional Diversity Network

Rentokil Initial PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rentokil Initial PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Rentokil Initial is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Professional Diversity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Professional Diversity Network has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Rentokil Initial and Professional Diversity

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

The idea behind Rentokil Initial PLC and Professional Diversity Network 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 Stocks Directory module to find actively traded stocks across global markets.