Correlation Between Bunzl Plc and Jerónimo Martins

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

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

Diversification Opportunities for Bunzl Plc and Jerónimo Martins

-0.2

Correlation Coefficient

Bunzl Plc  Jerónimo Martins

Good diversification

The 3 months correlation between Bunzl and Jerónimo is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bunzl plc and Jernimo Martins SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jernimo Martins SGPS and Bunzl Plc 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 Bunzl plc are associated (or correlated) with Jerónimo Martins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jernimo Martins SGPS has no effect on the direction of Bunzl Plc i.e., Bunzl Plc and Jerónimo Martins go up and down completely randomly.

Pair Corralation between Bunzl Plc and Jerónimo Martins

Assuming the 90 days trading horizon Bunzl plc is expected to under-perform the Jerónimo Martins. But the stock apears to be less risky and, when comparing its historical volatility, Bunzl plc is 1.58 times less risky than Jerónimo Martins. The stock trades about -0.04 of its potential returns per unit of risk. The Jernimo Martins SGPS is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,652  in Jernimo Martins SGPS on October 23, 2024 and sell it today you would earn a total of  186.00  from holding Jernimo Martins SGPS or generate 11.26% return on investment over 90 days.

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

Bunzl plc  vs.  Jernimo Martins SGPS

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Jernimo Martins SGPS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jernimo Martins SGPS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Jerónimo Martins may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bunzl Plc and Jerónimo Martins

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

The idea behind Bunzl plc and Jernimo Martins SGPS 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.