Correlation Between Thomson Reuters and Cintas

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

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

Diversification Opportunities for Thomson Reuters and Cintas

0.25

Correlation Coefficient

Thomson Reuters  Cintas

Modest diversification

The 3 months correlation between Thomson and Cintas is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Thomson Reuters Corp and Cintas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cintas and Thomson Reuters 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 Thomson Reuters Corp are associated (or correlated) with Cintas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cintas has no effect on the direction of Thomson Reuters i.e., Thomson Reuters and Cintas go up and down completely randomly.

Pair Corralation between Thomson Reuters and Cintas

Considering the 90-day investment horizon Thomson Reuters Corp is expected to generate 0.58 times more return on investment than Cintas. However, Thomson Reuters Corp is 1.73 times less risky than Cintas. It trades about 0.13 of its potential returns per unit of risk. Cintas is currently generating about -0.05 per unit of risk. If you would invest  16,020  in Thomson Reuters Corp on November 20, 2024 and sell it today you would earn a total of  1,349  from holding Thomson Reuters Corp or generate 8.42% return on investment over 90 days.

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

Thomson Reuters Corp  vs.  Cintas

Thomson Reuters Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thomson Reuters Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Thomson Reuters may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Cintas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cintas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cintas is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Thomson Reuters and Cintas

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

The idea behind Thomson Reuters Corp and Cintas 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.