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

0.31

Correlation Coefficient

Rentokil Initial  Network 1

Weak diversification

The 3 months correlation between Rentokil and Network is 0.31. 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 PLC is expected to generate 1.17 times more return on investment than Network 1. However, Rentokil Initial is 1.17 times more volatile than Network 1 Technologies. It trades about 0.29 of its potential returns per unit of risk. Network 1 Technologies is currently generating about 0.0 per unit of risk. If you would invest  1,991  in Rentokil Initial PLC on February 7, 2025 and sell it today you would earn a total of  344.00  from holding Rentokil Initial PLC or generate 17.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Rentokil Initial PLC  vs.  Network 1 Technologies

Rentokil Initial PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rentokil Initial PLC has generated negative risk-adjusted returns adding no value to investors with long positions. 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

Very Weak

Over the last 90 days Network 1 Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Network 1 is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.