Correlation Between McGrath RentCorp and Cintas

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

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

Diversification Opportunities for McGrath RentCorp and Cintas

-0.63

Correlation Coefficient

McGrath RentCorp  Cintas

Excellent diversification

The 3 months correlation between McGrath and Cintas is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding McGrath RentCorp and Cintas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cintas and McGrath RentCorp 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 McGrath RentCorp 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 McGrath RentCorp i.e., McGrath RentCorp and Cintas go up and down completely randomly.

Pair Corralation between McGrath RentCorp and Cintas

Given the investment horizon of 90 days McGrath RentCorp is expected to generate 12.26 times less return on investment than Cintas. But when comparing it to its historical volatility, McGrath RentCorp is 1.04 times less risky than Cintas. It trades about 0.0 of its potential returns per unit of risk. Cintas is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  67,272  in Cintas on March 4, 2024 and sell it today you would earn a total of  525.00  from holding Cintas or generate 0.78% return on investment over 90 days.

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

McGrath RentCorp  vs.  Cintas

McGrath RentCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days McGrath RentCorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Cintas

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cintas are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cintas may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with McGrath RentCorp and Cintas

The main advantage of trading using opposite McGrath RentCorp and Cintas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McGrath RentCorp 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 McGrath RentCorp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.