Correlation Between Bon Natural and Natures Sunshine

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

Diversification Opportunities for Bon Natural and Natures Sunshine

-0.64

Correlation Coefficient

Bon Natural  Natures Sunshine

Excellent diversification

The 3 months correlation between Bon and Natures is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bon Natural Life and Natures Sunshine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natures Sunshine Products 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 Natures Sunshine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natures Sunshine Products has no effect on the direction of Bon Natural i.e., Bon Natural and Natures Sunshine go up and down completely randomly.

Pair Corralation between Bon Natural and Natures Sunshine

Considering the 90-day investment horizon Bon Natural Life is expected to under-perform the Natures Sunshine. In addition to that, Bon Natural is 2.49 times more volatile than Natures Sunshine Products. It trades about -0.05 of its total potential returns per unit of risk. Natures Sunshine Products is currently generating about 0.05 per unit of volatility. If you would invest  1,231  in Natures Sunshine Products on February 1, 2024 and sell it today you would earn a total of  700.00  from holding Natures Sunshine Products or generate 56.86% return on investment over 90 days.

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

Bon Natural Life  vs.  Natures Sunshine Products

Bon Natural Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bon Natural Life has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Natures Sunshine Products

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Natures Sunshine Products are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Natures Sunshine may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Bon Natural and Natures Sunshine

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

The idea behind Bon Natural Life and Natures Sunshine Products 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..