Correlation Between Axfood AB and Bunzl Plc

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

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

Diversification Opportunities for Axfood AB and Bunzl Plc

0.07

Correlation Coefficient

Axfood AB  Bunzl Plc

Significant diversification

The 3 months correlation between Axfood and Bunzl is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Axfood AB and Bunzl plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunzl plc and Axfood AB 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 Axfood AB 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 Axfood AB i.e., Axfood AB and Bunzl Plc go up and down completely randomly.

Pair Corralation between Axfood AB and Bunzl Plc

Assuming the 90 days trading horizon Axfood AB is expected to generate 1.86 times more return on investment than Bunzl Plc. However, Axfood AB is 1.86 times more volatile than Bunzl plc. It trades about 0.06 of its potential returns per unit of risk. Bunzl plc is currently generating about 0.04 per unit of risk. If you would invest  1,095  in Axfood AB on October 5, 2024 and sell it today you would earn a total of  907.00  from holding Axfood AB or generate 82.83% return on investment over 90 days.

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

Axfood AB  vs.  Bunzl plc

Axfood AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axfood AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Bunzl plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bunzl plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bunzl Plc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Axfood AB and Bunzl Plc

The main advantage of trading using opposite Axfood AB and Bunzl Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axfood AB 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 Axfood AB 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.