Correlation Between Bunzl PLC and Derwent London
Can any of the company-specific risk be diversified away by investing in both Bunzl PLC and Derwent London 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 Derwent London into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bunzl PLC and Derwent London PLC, you can compare the effects of market volatilities on Bunzl PLC and Derwent London 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 Derwent London. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunzl PLC and Derwent London.
Diversification Opportunities for Bunzl PLC and Derwent London
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bunzl and Derwent is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Bunzl PLC and Derwent London PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Derwent London PLC 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 Derwent London. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Derwent London PLC has no effect on the direction of Bunzl PLC i.e., Bunzl PLC and Derwent London go up and down completely randomly.
Pair Corralation between Bunzl PLC and Derwent London
Assuming the 90 days trading horizon Bunzl PLC is expected to generate 0.7 times more return on investment than Derwent London. However, Bunzl PLC is 1.43 times less risky than Derwent London. It trades about 0.06 of its potential returns per unit of risk. Derwent London PLC is currently generating about -0.03 per unit of risk. If you would invest 309,199 in Bunzl PLC on September 14, 2024 and sell it today you would earn a total of 44,201 from holding Bunzl PLC or generate 14.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Bunzl PLC vs. Derwent London PLC
Performance |
| Timeline |
| Bunzl PLC |
| Derwent London PLC |
Bunzl PLC and Derwent London Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bunzl PLC and Derwent London
The main advantage of trading using opposite Bunzl PLC and Derwent London positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunzl PLC position performs unexpectedly, Derwent London 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 Derwent London will offset losses from the drop in Derwent London's long position.| Bunzl PLC vs. Check Point Software | Bunzl PLC vs. Games Workshop Group | Bunzl PLC vs. Playtech Plc | Bunzl PLC vs. Gaming Realms plc |
| Derwent London vs. GreenX Metals | Derwent London vs. UNIQA Insurance Group | Derwent London vs. Adriatic Metals | Derwent London vs. Atalaya Mining |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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