Correlation Between Teleperformance and Rentokil Initial

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

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

Diversification Opportunities for Teleperformance and Rentokil Initial

-0.23

Correlation Coefficient

Teleperformance  Rentokil Initial

Very good diversification

The 3 months correlation between Teleperformance and Rentokil is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Teleperformance SE and Rentokil Initial plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rentokil Initial plc and Teleperformance 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 Teleperformance SE are associated (or correlated) with Rentokil Initial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rentokil Initial plc has no effect on the direction of Teleperformance i.e., Teleperformance and Rentokil Initial go up and down completely randomly.

Pair Corralation between Teleperformance and Rentokil Initial

Assuming the 90 days horizon Teleperformance SE is expected to under-perform the Rentokil Initial. But the pink sheet apears to be less risky and, when comparing its historical volatility, Teleperformance SE is 1.14 times less risky than Rentokil Initial. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Rentokil Initial plc is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  806.00  in Rentokil Initial plc on October 12, 2024 and sell it today you would lose (311.00) from holding Rentokil Initial plc or give up 38.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.76%
Values	Daily Returns

Teleperformance SE  vs.  Rentokil Initial plc

Teleperformance SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teleperformance SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Rentokil Initial plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rentokil Initial plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, Rentokil Initial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teleperformance and Rentokil Initial

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

The idea behind Teleperformance SE and Rentokil Initial 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.