Correlation Between Bonny Worldwide and LARGAN Precision

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

By analyzing existing cross correlation between Bonny Worldwide and LARGAN Precision Co, you can compare the effects of market volatilities on Bonny Worldwide and LARGAN Precision 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 Bonny Worldwide with a short position of LARGAN Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bonny Worldwide and LARGAN Precision.

Diversification Opportunities for Bonny Worldwide and LARGAN Precision

-0.51

Correlation Coefficient

Bonny Worldwide  LARGAN Precision

Excellent diversification

The 3 months correlation between Bonny and LARGAN is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Bonny Worldwide and LARGAN Precision Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LARGAN Precision and Bonny Worldwide 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 Bonny Worldwide are associated (or correlated) with LARGAN Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LARGAN Precision has no effect on the direction of Bonny Worldwide i.e., Bonny Worldwide and LARGAN Precision go up and down completely randomly.

Pair Corralation between Bonny Worldwide and LARGAN Precision

Assuming the 90 days trading horizon Bonny Worldwide is expected to generate 1.37 times more return on investment than LARGAN Precision. However, Bonny Worldwide is 1.37 times more volatile than LARGAN Precision Co. It trades about 0.11 of its potential returns per unit of risk. LARGAN Precision Co is currently generating about -0.15 per unit of risk. If you would invest  22,500  in Bonny Worldwide on September 2, 2024 and sell it today you would earn a total of  4,650  from holding Bonny Worldwide or generate 20.67% return on investment over 90 days.

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

Bonny Worldwide  vs.  LARGAN Precision Co

Bonny Worldwide

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bonny Worldwide are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Bonny Worldwide showed solid returns over the last few months and may actually be approaching a breakup point.

LARGAN Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LARGAN Precision Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Bonny Worldwide and LARGAN Precision

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

The idea behind Bonny Worldwide and LARGAN Precision Co 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.