Correlation Between Bunzl Plc and Brown Forman
Can any of the company-specific risk be diversified away by investing in both Bunzl Plc and Brown Forman 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 Brown Forman into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bunzl plc and Brown Forman, you can compare the effects of market volatilities on Bunzl Plc and Brown Forman 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 Brown Forman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunzl Plc and Brown Forman.
Diversification Opportunities for Bunzl Plc and Brown Forman
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bunzl and Brown is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bunzl plc and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman 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 Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of Bunzl Plc i.e., Bunzl Plc and Brown Forman go up and down completely randomly.
Pair Corralation between Bunzl Plc and Brown Forman
Assuming the 90 days horizon Bunzl plc is expected to generate 1.8 times more return on investment than Brown Forman. However, Bunzl Plc is 1.8 times more volatile than Brown Forman. It trades about 0.27 of its potential returns per unit of risk. Brown Forman is currently generating about 0.12 per unit of risk. If you would invest 4,246 in Bunzl plc on June 24, 2024 and sell it today you would earn a total of 529.00 from holding Bunzl plc or generate 12.46% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Bunzl plc vs. Brown Forman
Performance |
Timeline |
Bunzl plc |
Brown Forman |
Bunzl Plc and Brown Forman Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bunzl Plc and Brown Forman
The main advantage of trading using opposite Bunzl Plc and Brown Forman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunzl Plc position performs unexpectedly, Brown Forman 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 Brown Forman will offset losses from the drop in Brown Forman's long position.Bunzl Plc vs. Leonardo Spa | Bunzl Plc vs. QinetiQ Group plc | Bunzl Plc vs. Leonardo SpA ADR | Bunzl Plc vs. Huntington Ingalls Industries |
Brown Forman vs. Pernod Ricard SA | Brown Forman vs. Willamette Valley Vineyards | Brown Forman vs. MGP Ingredients | Brown Forman vs. Duckhorn Portfolio |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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