Correlation Between China Mengniu and Bunzl Plc

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

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

Diversification Opportunities for China Mengniu and Bunzl Plc

0.38

Correlation Coefficient

China Mengniu  Bunzl Plc

Weak diversification

The 3 months correlation between China and Bunzl is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding China Mengniu Dairy and Bunzl plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunzl plc and China Mengniu 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 China Mengniu Dairy are associated (or correlated) with Bunzl Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bunzl plc has no effect on the direction of China Mengniu i.e., China Mengniu and Bunzl Plc go up and down completely randomly.

Pair Corralation between China Mengniu and Bunzl Plc

Assuming the 90 days horizon China Mengniu Dairy is expected to under-perform the Bunzl Plc. In addition to that, China Mengniu is 3.05 times more volatile than Bunzl plc. It trades about -0.3 of its total potential returns per unit of risk. Bunzl plc is currently generating about 0.02 per unit of volatility. If you would invest  2,100  in Bunzl plc on October 27, 2024 and sell it today you would earn a total of  6.00  from holding Bunzl plc or generate 0.29% return on investment over 90 days.

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

China Mengniu Dairy  vs.  Bunzl plc

China Mengniu Dairy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Mengniu Dairy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with China Mengniu and Bunzl Plc

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

The idea behind China Mengniu Dairy and Bunzl plc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.