Correlation Between Bon Natural and Hershey

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

Diversification Opportunities for Bon Natural and Hershey

0.59

Correlation Coefficient

Bon Natural  Hershey

Very weak diversification

The 3 months correlation between Bon and Hershey is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bon Natural Life and Hershey Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hershey 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 Hershey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hershey has no effect on the direction of Bon Natural i.e., Bon Natural and Hershey go up and down completely randomly.

Pair Corralation between Bon Natural and Hershey

Considering the 90-day investment horizon Bon Natural Life is expected to generate 2.05 times more return on investment than Hershey. However, Bon Natural is 2.05 times more volatile than Hershey Co. It trades about 0.08 of its potential returns per unit of risk. Hershey Co is currently generating about 0.1 per unit of risk. If you would invest  147.00  in Bon Natural Life on September 12, 2024 and sell it today you would earn a total of  9.00  from holding Bon Natural Life or generate 6.12% return on investment over 90 days.

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

Bon Natural Life  vs.  Hershey Co

Bon Natural Life

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bon Natural Life are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Bon Natural is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Hershey

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hershey Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Hershey is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bon Natural and Hershey

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

The idea behind Bon Natural Life and Hershey 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.