Correlation Between Sodexo PK and Intertek Group

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

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

Diversification Opportunities for Sodexo PK and Intertek Group

-0.46

Correlation Coefficient

Sodexo PK  Intertek Group

Very good diversification

The 3 months correlation between Sodexo and Intertek is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sodexo PK and Intertek Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intertek Group Plc and Sodexo PK 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 Sodexo PK are associated (or correlated) with Intertek Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intertek Group Plc has no effect on the direction of Sodexo PK i.e., Sodexo PK and Intertek Group go up and down completely randomly.

Pair Corralation between Sodexo PK and Intertek Group

Assuming the 90 days horizon Sodexo PK is expected to generate 0.64 times more return on investment than Intertek Group. However, Sodexo PK is 1.57 times less risky than Intertek Group. It trades about 0.15 of its potential returns per unit of risk. Intertek Group Plc is currently generating about -0.02 per unit of risk. If you would invest  1,479  in Sodexo PK on December 2, 2024 and sell it today you would earn a total of  52.00  from holding Sodexo PK or generate 3.52% return on investment over 90 days.

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

Sodexo PK  vs.  Intertek Group Plc

Sodexo PK

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sodexo PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sodexo PK is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Intertek Group Plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intertek Group Plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Intertek Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sodexo PK and Intertek Group

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

The idea behind Sodexo PK and Intertek Group Plc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.