Correlation Between Service International and Rollins

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

By analyzing existing cross correlation between Service International and Rollins, you can compare the effects of market volatilities on Service International and Rollins 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 Service International with a short position of Rollins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Service International and Rollins.

Diversification Opportunities for Service International and Rollins

0.34

Correlation Coefficient

Service International  Rollins

Weak diversification

The 3 months correlation between Service and Rollins is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Service International and Rollins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rollins and Service International 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 Service International are associated (or correlated) with Rollins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rollins has no effect on the direction of Service International i.e., Service International and Rollins go up and down completely randomly.

Pair Corralation between Service International and Rollins

Considering the 90-day investment horizon Service International is expected to generate 0.96 times more return on investment than Rollins. However, Service International is 1.04 times less risky than Rollins. It trades about 0.16 of its potential returns per unit of risk. Rollins is currently generating about 0.03 per unit of risk. If you would invest  7,777  in Service International on August 31, 2024 and sell it today you would earn a total of  1,083  from holding Service International or generate 13.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Service International  vs.  Rollins

Service International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Service International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, Service International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Rollins

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rollins are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Rollins is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Service International and Rollins

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

The idea behind Service International and Rollins 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.