Correlation Between Tejon Ranch and Cintas

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

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

Diversification Opportunities for Tejon Ranch and Cintas

-0.11

Correlation Coefficient

Tejon Ranch  Cintas

Good diversification

The 3 months correlation between Tejon and Cintas is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Tejon Ranch Co and Cintas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cintas and Tejon Ranch 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 Tejon Ranch Co 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 Tejon Ranch i.e., Tejon Ranch and Cintas go up and down completely randomly.

Pair Corralation between Tejon Ranch and Cintas

Considering the 90-day investment horizon Tejon Ranch is expected to generate 1.39 times less return on investment than Cintas. In addition to that, Tejon Ranch is 1.46 times more volatile than Cintas. It trades about 0.08 of its total potential returns per unit of risk. Cintas is currently generating about 0.16 per unit of volatility. If you would invest  61,344  in Cintas on February 19, 2024 and sell it today you would earn a total of  7,870  from holding Cintas or generate 12.83% return on investment over 90 days.

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

Tejon Ranch Co  vs.  Cintas

Tejon Ranch

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tejon Ranch Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Tejon Ranch may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Cintas

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cintas are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Cintas may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Tejon Ranch and Cintas

The main advantage of trading using opposite Tejon Ranch and Cintas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tejon Ranch 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 Tejon Ranch Co 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.