Correlation Between Rentokil Initial and Network 1

Can any of the company-specific risk be diversified away by investing in both Rentokil Initial and Network 1 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 Network 1 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 Network 1 Technologies, you can compare the effects of market volatilities on Rentokil Initial and Network 1 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 Network 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rentokil Initial and Network 1.

Diversification Opportunities for Rentokil Initial and Network 1

-0.48

Correlation Coefficient

Rentokil Initial  Network 1

Very good diversification

The 3 months correlation between Rentokil and Network is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Rentokil Initial PLC and Network 1 Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network 1 Technologies 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 Network 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network 1 Technologies has no effect on the direction of Rentokil Initial i.e., Rentokil Initial and Network 1 go up and down completely randomly.

Pair Corralation between Rentokil Initial and Network 1

Considering the 90-day investment horizon Rentokil Initial is expected to generate 1.46 times less return on investment than Network 1. But when comparing it to its historical volatility, Rentokil Initial PLC is 1.38 times less risky than Network 1. It trades about 0.05 of its potential returns per unit of risk. Network 1 Technologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  132.00  in Network 1 Technologies on November 19, 2024 and sell it today you would earn a total of  7.00  from holding Network 1 Technologies or generate 5.3% return on investment over 90 days.

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

Rentokil Initial PLC  vs.  Network 1 Technologies

Rentokil Initial PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rentokil Initial PLC are ranked lower than 3 (%) 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.

Network 1 Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Network 1 Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward indicators, Network 1 may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Rentokil Initial and Network 1

The main advantage of trading using opposite Rentokil Initial and Network 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rentokil Initial position performs unexpectedly, Network 1 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 Network 1 will offset losses from the drop in Network 1's long position.

The idea behind Rentokil Initial PLC and Network 1 Technologies 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.