Correlation Between Bunzl Plc and Coca Cola

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

By analyzing existing cross correlation between Bunzl plc and Coca Cola HBC, you can compare the effects of market volatilities on Bunzl Plc and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunzl Plc and Coca Cola.

Diversification Opportunities for Bunzl Plc and Coca Cola

-0.3

Correlation Coefficient

Bunzl Plc  Coca Cola

Very good diversification

The 3 months correlation between Bunzl and Coca is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bunzl plc and Coca Cola HBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola HBC 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola HBC has no effect on the direction of Bunzl Plc i.e., Bunzl Plc and Coca Cola go up and down completely randomly.

Pair Corralation between Bunzl Plc and Coca Cola

Assuming the 90 days horizon Bunzl Plc is expected to generate 4.72 times less return on investment than Coca Cola. But when comparing it to its historical volatility, Bunzl plc is 1.18 times less risky than Coca Cola. It trades about 0.04 of its potential returns per unit of risk. Coca Cola HBC is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,290  in Coca Cola HBC on October 4, 2024 and sell it today you would earn a total of  773.00  from holding Coca Cola HBC or generate 33.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	26.67%
Values	Daily Returns

Bunzl plc  vs.  Coca Cola HBC

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. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Coca Cola HBC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coca Cola HBC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Coca Cola is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bunzl Plc and Coca Cola

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

The idea behind Bunzl plc and Coca Cola HBC 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 Stocks Directory module to find actively traded stocks across global markets.