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
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Farmer and Bon is 0.14. 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 under-perform the Bon Natural. But the stock apears to be less risky and, when comparing its historical volatility, Farmer Bros Co is 2.44 times less risky than Bon Natural. The stock trades about -0.26 of its potential returns per unit of risk. The Bon Natural Life is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 153.00 in Bon Natural Life on October 7, 2024 and sell it today you would earn a total of 19.00 from holding Bon Natural Life or generate 12.42% return on investment 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
Performance |
| Timeline |
| Farmer Bros |
| Bon Natural Life |
Farmer Bros and Bon Natural Volatility Contrast
Predicted Return Density |
| Returns |
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.| Farmer Bros vs. Bridgford Foods | Farmer Bros vs. Seneca Foods Corp | Farmer Bros vs. Lifeway Foods | Farmer Bros vs. SSMTF |
| Bon Natural vs. Blue Star Foods | Bon Natural vs. Grand Havana | Bon Natural vs. Real Good Food | Bon Natural vs. Central Garden Pet |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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