Correlation Between Aluminum and Bunzl Plc
Can any of the company-specific risk be diversified away by investing in both Aluminum 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 Aluminum and Bunzl Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aluminum of and Bunzl plc, you can compare the effects of market volatilities on Aluminum 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 Aluminum with a short position of Bunzl Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aluminum and Bunzl Plc.
Diversification Opportunities for Aluminum and Bunzl Plc
Average diversification
The 3 months correlation between Aluminum and Bunzl is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Aluminum of and Bunzl plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunzl plc and Aluminum 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 Aluminum of 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 Aluminum i.e., Aluminum and Bunzl Plc go up and down completely randomly.
Pair Corralation between Aluminum and Bunzl Plc
Assuming the 90 days horizon Aluminum of is expected to generate 2.61 times more return on investment than Bunzl Plc. However, Aluminum is 2.61 times more volatile than Bunzl plc. It trades about 0.05 of its potential returns per unit of risk. Bunzl plc is currently generating about 0.04 per unit of risk. If you would invest 32.00 in Aluminum of on November 1, 2024 and sell it today you would earn a total of 28.00 from holding Aluminum of or generate 87.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Aluminum of vs. Bunzl plc
Performance |
| Timeline |
| Aluminum |
| Bunzl plc |
Aluminum and Bunzl Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aluminum and Bunzl Plc
The main advantage of trading using opposite Aluminum and Bunzl Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aluminum 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.| Aluminum vs. LG Electronics | Aluminum vs. Perseus Mining Limited | Aluminum vs. Renesas Electronics | Aluminum vs. De Grey Mining |
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Check out your portfolio center.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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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