Correlation Between Farmer Bros and Bon Natural

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

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

Diversification Opportunities for Farmer Bros and Bon Natural

0.07

Correlation Coefficient

Farmer Bros  Bon Natural

Significant diversification

The 3 months correlation between Farmer and Bon is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Farmer Bros Co 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 Farmer Bros 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 Farmer Bros Co 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 Farmer Bros i.e., Farmer Bros and Bon Natural go up and down completely randomly.

Pair Corralation between Farmer Bros and Bon Natural

Given the investment horizon of 90 days Farmer Bros Co is expected to generate 0.39 times more return on investment than Bon Natural. However, Farmer Bros Co is 2.53 times less risky than Bon Natural. It trades about -0.09 of its potential returns per unit of risk. Bon Natural Life is currently generating about -0.19 per unit of risk. If you would invest  177.00  in Farmer Bros Co on October 27, 2024 and sell it today you would lose (5.00) from holding Farmer Bros Co or give up 2.82% of portfolio value over 90 days.

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

Farmer Bros Co  vs.  Bon Natural Life

Farmer Bros

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Farmer Bros Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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.

Pair Trading with Farmer Bros and Bon Natural

The main advantage of trading using opposite Farmer Bros and Bon Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmer Bros 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 Farmer Bros Co 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..