Correlation Between Bon Natural and Farmmi

Can any of the company-specific risk be diversified away by investing in both Bon Natural and Farmmi 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 Farmmi 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 Farmmi Inc, you can compare the effects of market volatilities on Bon Natural and Farmmi 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 Farmmi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bon Natural and Farmmi.

Diversification Opportunities for Bon Natural and Farmmi

-0.02

Correlation Coefficient

Bon Natural  Farmmi

Good diversification

The 3 months correlation between Bon and Farmmi is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Bon Natural Life and Farmmi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmmi Inc 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 Farmmi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmmi Inc has no effect on the direction of Bon Natural i.e., Bon Natural and Farmmi go up and down completely randomly.

Pair Corralation between Bon Natural and Farmmi

Considering the 90-day investment horizon Bon Natural Life is expected to under-perform the Farmmi. But the stock apears to be less risky and, when comparing its historical volatility, Bon Natural Life is 1.7 times less risky than Farmmi. The stock trades about -0.19 of its potential returns per unit of risk. The Farmmi Inc is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Farmmi Inc on October 27, 2024 and sell it today you would lose (4.00) from holding Farmmi Inc or give up 13.33% of portfolio value over 90 days.

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

Bon Natural Life  vs.  Farmmi Inc

Bon Natural Life

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bon Natural Life are ranked lower than 1 (%) 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.

Farmmi Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farmmi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Bon Natural and Farmmi

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

The idea behind Bon Natural Life and Farmmi Inc 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.