Correlation Between Bon Natural and Blue Star

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

Diversification Opportunities for Bon Natural and Blue Star

0.6

Correlation Coefficient

Bon Natural  Blue Star

Poor diversification

The 3 months correlation between Bon and Blue is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bon Natural Life and Blue Star Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Star Foods 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 Blue Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Star Foods has no effect on the direction of Bon Natural i.e., Bon Natural and Blue Star go up and down completely randomly.

Pair Corralation between Bon Natural and Blue Star

Considering the 90-day investment horizon Bon Natural Life is expected to generate 0.47 times more return on investment than Blue Star. However, Bon Natural Life is 2.12 times less risky than Blue Star. It trades about 0.03 of its potential returns per unit of risk. Blue Star Foods is currently generating about -0.13 per unit of risk. If you would invest  184.00  in Bon Natural Life on August 30, 2024 and sell it today you would earn a total of  1.00  from holding Bon Natural Life or generate 0.54% return on investment over 90 days.

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

Bon Natural Life  vs.  Blue Star Foods

Bon Natural Life

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bon Natural Life are ranked lower than 2 (%) 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 December 2024.

Blue Star Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Star Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bon Natural and Blue Star

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

The idea behind Bon Natural Life and Blue Star Foods 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.