Correlation Between BG Foods and Bon Natural

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

By analyzing existing cross correlation between BG Foods and Bon Natural Life, you can compare the effects of market volatilities on BG Foods and Bon Natural 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 BG Foods with a short position of Bon Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of BG Foods and Bon Natural.

Diversification Opportunities for BG Foods and Bon Natural

0.11

Correlation Coefficient

BG Foods  Bon Natural

Average diversification

The 3 months correlation between BGS and Bon is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding BG Foods and Bon Natural Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bon Natural Life and BG 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 BG Foods are associated (or correlated) with Bon Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bon Natural Life has no effect on the direction of BG Foods i.e., BG Foods and Bon Natural go up and down completely randomly.

Pair Corralation between BG Foods and Bon Natural

Considering the 90-day investment horizon BG Foods is expected to generate 194.1 times less return on investment than Bon Natural. But when comparing it to its historical volatility, BG Foods is 4.93 times less risky than Bon Natural. It trades about 0.0 of its potential returns per unit of risk. Bon Natural Life is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  170.00  in Bon Natural Life on December 15, 2024 and sell it today you would lose (26.00) from holding Bon Natural Life or give up 15.29% of portfolio value over 90 days.

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

BG Foods  vs.  Bon Natural Life

BG Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days BG Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, BG Foods is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Bon Natural Life

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bon Natural Life are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Bon Natural displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BG Foods and Bon Natural

The main advantage of trading using opposite BG Foods and Bon Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BG Foods position performs unexpectedly, Bon Natural 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 Bon Natural will offset losses from the drop in Bon Natural's long position.

The idea behind BG Foods and Bon Natural Life 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.