Correlation Between Bunge and Bon Natural

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

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

Diversification Opportunities for Bunge and Bon Natural

0.69

Correlation Coefficient

Bunge  Bon Natural

Poor diversification

The 3 months correlation between Bunge and Bon is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited 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 Bunge 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 Bunge Limited 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 Bunge i.e., Bunge and Bon Natural go up and down completely randomly.

Pair Corralation between Bunge and Bon Natural

Allowing for the 90-day total investment horizon Bunge Limited is expected to generate 0.53 times more return on investment than Bon Natural. However, Bunge Limited is 1.89 times less risky than Bon Natural. It trades about -0.17 of its potential returns per unit of risk. Bon Natural Life is currently generating about -0.14 per unit of risk. If you would invest  9,468  in Bunge Limited on August 16, 2024 and sell it today you would lose (662.00) from holding Bunge Limited or give up 6.99% of portfolio value over 90 days.

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

Bunge Limited  vs.  Bon Natural Life

Bunge Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bunge Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Bunge and Bon Natural

The main advantage of trading using opposite Bunge and Bon Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge 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 Bunge Limited 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.