Correlation Between US Foods and Bunzl Plc

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

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

Diversification Opportunities for US Foods and Bunzl Plc

0.44

Correlation Coefficient

US Foods  Bunzl Plc

Very weak diversification

The 3 months correlation between USFD and Bunzl is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding US Foods Holding and Bunzl plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunzl plc and US Foods 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 US Foods Holding 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 US Foods i.e., US Foods and Bunzl Plc go up and down completely randomly.

Pair Corralation between US Foods and Bunzl Plc

Given the investment horizon of 90 days US Foods is expected to generate 4.68 times less return on investment than Bunzl Plc. In addition to that, US Foods is 1.1 times more volatile than Bunzl plc. It trades about 0.01 of its total potential returns per unit of risk. Bunzl plc is currently generating about 0.06 per unit of volatility. If you would invest  2,114  in Bunzl plc on November 28, 2024 and sell it today you would earn a total of  19.00  from holding Bunzl plc or generate 0.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

US Foods Holding  vs.  Bunzl plc

US Foods Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in US Foods Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, US Foods is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 US Foods and Bunzl Plc

The main advantage of trading using opposite US Foods and Bunzl Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Foods 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 US Foods Holding 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.