Correlation Between Bon Natural and Freshpet

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

Diversification Opportunities for Bon Natural and Freshpet

-0.81

Correlation Coefficient

Bon Natural  Freshpet

Pay attention - limited upside

The 3 months correlation between Bon and Freshpet is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bon Natural Life and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet 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 Freshpet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freshpet has no effect on the direction of Bon Natural i.e., Bon Natural and Freshpet go up and down completely randomly.

Pair Corralation between Bon Natural and Freshpet

Considering the 90-day investment horizon Bon Natural Life is expected to generate 4.31 times more return on investment than Freshpet. However, Bon Natural is 4.31 times more volatile than Freshpet. It trades about 0.05 of its potential returns per unit of risk. Freshpet is currently generating about -0.24 per unit of risk. If you would invest  416.00  in Bon Natural Life on January 29, 2024 and sell it today you would earn a total of  11.00  from holding Bon Natural Life or generate 2.64% return on investment over 90 days.

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

Bon Natural Life  vs.  Freshpet

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

Freshpet

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freshpet are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Freshpet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bon Natural and Freshpet

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

The idea behind Bon Natural Life and Freshpet 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.