Correlation Between Bunzl Plc and Mondi PLC

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

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

Diversification Opportunities for Bunzl Plc and Mondi PLC

-0.28

Correlation Coefficient

Bunzl Plc  Mondi PLC

Very good diversification

The 3 months correlation between Bunzl and Mondi is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bunzl plc and Mondi PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondi PLC ADR 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 Mondi PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondi PLC ADR has no effect on the direction of Bunzl Plc i.e., Bunzl Plc and Mondi PLC go up and down completely randomly.

Pair Corralation between Bunzl Plc and Mondi PLC

Assuming the 90 days horizon Bunzl plc is expected to under-perform the Mondi PLC. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bunzl plc is 1.33 times less risky than Mondi PLC. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Mondi PLC ADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,921  in Mondi PLC ADR on December 29, 2024 and sell it today you would earn a total of  141.00  from holding Mondi PLC ADR or generate 4.83% 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.  Mondi PLC ADR

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. 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.

Mondi PLC ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mondi PLC ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Mondi PLC 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 Mondi PLC

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

The idea behind Bunzl plc and Mondi PLC ADR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.