Correlation Between Bunzl Plc and Chocoladefabriken

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

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

Diversification Opportunities for Bunzl Plc and Chocoladefabriken

0.68

Correlation Coefficient

Bunzl Plc  Chocoladefabriken

Poor diversification

The 3 months correlation between Bunzl and Chocoladefabriken is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bunzl plc and Chocoladefabriken Lindt Sprngl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chocoladefabriken Lindt 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 Chocoladefabriken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chocoladefabriken Lindt has no effect on the direction of Bunzl Plc i.e., Bunzl Plc and Chocoladefabriken go up and down completely randomly.

Pair Corralation between Bunzl Plc and Chocoladefabriken

Assuming the 90 days horizon Bunzl plc is expected to under-perform the Chocoladefabriken. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bunzl plc is 1.0 times less risky than Chocoladefabriken. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Chocoladefabriken Lindt Sprngli is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  1,200,000  in Chocoladefabriken Lindt Sprngli on October 27, 2024 and sell it today you would lose (80,000) from holding Chocoladefabriken Lindt Sprngli or give up 6.67% of portfolio value over 90 days.

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

Bunzl plc  vs.  Chocoladefabriken Lindt Sprngl

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 weak 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.

Chocoladefabriken Lindt

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chocoladefabriken Lindt Sprngli has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 Bunzl Plc and Chocoladefabriken

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

The idea behind Bunzl plc and Chocoladefabriken Lindt Sprngli 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.