Correlation Between Bunzl Plc and Performance Food

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

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

Diversification Opportunities for Bunzl Plc and Performance Food

0.51

Correlation Coefficient

Bunzl Plc  Performance Food

Very weak diversification

The 3 months correlation between Bunzl and Performance is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Bunzl plc and Performance Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Food 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 Performance Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Food has no effect on the direction of Bunzl Plc i.e., Bunzl Plc and Performance Food go up and down completely randomly.

Pair Corralation between Bunzl Plc and Performance Food

Assuming the 90 days horizon Bunzl plc is expected to generate 0.84 times more return on investment than Performance Food. However, Bunzl plc is 1.2 times less risky than Performance Food. It trades about -0.09 of its potential returns per unit of risk. Performance Food Group is currently generating about -0.08 per unit of risk. If you would invest  2,261  in Bunzl plc on November 28, 2024 and sell it today you would lose (128.00) from holding Bunzl plc or give up 5.66% of portfolio value over 90 days.

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

Bunzl plc  vs.  Performance Food Group

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 fairly strong technical and fundamental indicators, Bunzl Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Performance Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Performance Food Group 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 sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Bunzl Plc and Performance Food

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

The idea behind Bunzl plc and Performance Food Group 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.