Correlation Between Bon Natural and Borealis Foods

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

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

Diversification Opportunities for Bon Natural and Borealis Foods

0.42

Correlation Coefficient

Bon Natural  Borealis Foods

Very weak diversification

The 3 months correlation between Bon and Borealis is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Bon Natural Life and Borealis Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borealis Foods and Bon Natural 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 Bon Natural Life are associated (or correlated) with Borealis Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borealis Foods has no effect on the direction of Bon Natural i.e., Bon Natural and Borealis Foods go up and down completely randomly.

Pair Corralation between Bon Natural and Borealis Foods

Considering the 90-day investment horizon Bon Natural is expected to generate 2.16 times less return on investment than Borealis Foods. But when comparing it to its historical volatility, Bon Natural Life is 1.08 times less risky than Borealis Foods. It trades about 0.06 of its potential returns per unit of risk. Borealis Foods is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8.41  in Borealis Foods on October 12, 2024 and sell it today you would earn a total of  1.14  from holding Borealis Foods or generate 13.56% return on investment over 90 days.

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

Bon Natural Life  vs.  Borealis Foods

Bon Natural Life

Risk-Adjusted Performance

2 of 100

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 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Borealis Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Borealis Foods are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Borealis Foods showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bon Natural and Borealis Foods

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

The idea behind Bon Natural Life and Borealis Foods 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.