Correlation Between AZZ Incorporated and Cintas

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

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

Diversification Opportunities for AZZ Incorporated and Cintas

0.81

Correlation Coefficient

AZZ Incorporated  Cintas

Very poor diversification

The 3 months correlation between AZZ and Cintas is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding AZZ Incorporated and Cintas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cintas and AZZ Incorporated 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 AZZ Incorporated 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 AZZ Incorporated i.e., AZZ Incorporated and Cintas go up and down completely randomly.

Pair Corralation between AZZ Incorporated and Cintas

Considering the 90-day investment horizon AZZ Incorporated is expected to under-perform the Cintas. In addition to that, AZZ Incorporated is 4.87 times more volatile than Cintas. It trades about -0.08 of its total potential returns per unit of risk. Cintas is currently generating about -0.14 per unit of volatility. If you would invest  68,054  in Cintas on January 29, 2024 and sell it today you would lose (1,431) from holding Cintas or give up 2.1% of portfolio value over 90 days.

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

AZZ Incorporated  vs.  Cintas

AZZ Incorporated

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AZZ Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, AZZ Incorporated showed solid returns over the last few months and may actually be approaching a breakup point.

Cintas

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cintas are ranked lower than 10 (%) 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 May 2024.

Pair Trading with AZZ Incorporated and Cintas

The main advantage of trading using opposite AZZ Incorporated and Cintas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AZZ Incorporated 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 AZZ Incorporated 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.