Correlation Between Gaming and Bunzl Plc

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

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

Diversification Opportunities for Gaming and Bunzl Plc

-0.08

Correlation Coefficient

Gaming  Bunzl Plc

Good diversification

The 3 months correlation between Gaming and Bunzl is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Gaming and Leisure and Bunzl plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunzl plc and Gaming 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 Gaming and Leisure are associated (or correlated) with Bunzl Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bunzl plc has no effect on the direction of Gaming i.e., Gaming and Bunzl Plc go up and down completely randomly.

Pair Corralation between Gaming and Bunzl Plc

Assuming the 90 days horizon Gaming and Leisure is expected to generate 0.85 times more return on investment than Bunzl Plc. However, Gaming and Leisure is 1.17 times less risky than Bunzl Plc. It trades about 0.06 of its potential returns per unit of risk. Bunzl plc is currently generating about -0.11 per unit of risk. If you would invest  4,383  in Gaming and Leisure on December 20, 2024 and sell it today you would earn a total of  215.00  from holding Gaming and Leisure or generate 4.91% return on investment over 90 days.

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

Gaming and Leisure  vs.  Bunzl plc

Gaming and Leisure

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gaming and Leisure are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Gaming is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bunzl plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bunzl plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Gaming and Bunzl Plc

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

The idea behind Gaming and Leisure and Bunzl plc 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.