Correlation Between Medican Enterprises and Bunzl Plc

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

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

Diversification Opportunities for Medican Enterprises and Bunzl Plc

-0.22

Correlation Coefficient

Medican Enterprises  Bunzl Plc

Very good diversification

The 3 months correlation between Medican and Bunzl is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Medican Enterprises and Bunzl plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunzl plc and Medican Enterprises 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 Medican Enterprises 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 Medican Enterprises i.e., Medican Enterprises and Bunzl Plc go up and down completely randomly.

Pair Corralation between Medican Enterprises and Bunzl Plc

Given the investment horizon of 90 days Medican Enterprises is expected to generate 208.65 times more return on investment than Bunzl Plc. However, Medican Enterprises is 208.65 times more volatile than Bunzl plc. It trades about 0.21 of its potential returns per unit of risk. Bunzl plc is currently generating about -0.08 per unit of risk. If you would invest  0.00  in Medican Enterprises on November 29, 2024 and sell it today you would earn a total of  0.01  from holding Medican Enterprises or generate 9.223372036854776E16% return on investment over 90 days.

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

Medican Enterprises  vs.  Bunzl plc

Medican Enterprises

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Medican Enterprises are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Medican Enterprises displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Medican Enterprises and Bunzl Plc

The main advantage of trading using opposite Medican Enterprises and Bunzl Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Medican Enterprises 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 Medican Enterprises 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.