Correlation Between Archer Daniels and Bon Natural

Can any of the company-specific risk be diversified away by investing in both Archer Daniels 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 Archer Daniels and Bon Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Archer Daniels Midland and Bon Natural Life, you can compare the effects of market volatilities on Archer Daniels 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 Archer Daniels with a short position of Bon Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archer Daniels and Bon Natural.

Diversification Opportunities for Archer Daniels and Bon Natural

-0.57

Correlation Coefficient

Archer Daniels  Bon Natural

Excellent diversification

The 3 months correlation between Archer and Bon is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Archer Daniels Midland 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 Archer Daniels 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 Archer Daniels Midland 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 Archer Daniels i.e., Archer Daniels and Bon Natural go up and down completely randomly.

Pair Corralation between Archer Daniels and Bon Natural

Considering the 90-day investment horizon Archer Daniels Midland is expected to generate 0.2 times more return on investment than Bon Natural. However, Archer Daniels Midland is 5.07 times less risky than Bon Natural. It trades about 0.18 of its potential returns per unit of risk. Bon Natural Life is currently generating about -0.13 per unit of risk. If you would invest  5,297  in Archer Daniels Midland on February 19, 2024 and sell it today you would earn a total of  865.00  from holding Archer Daniels Midland or generate 16.33% return on investment over 90 days.

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

Archer Daniels Midland  vs.  Bon Natural Life

Archer Daniels Midland

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Daniels Midland are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Archer Daniels displayed solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with Archer Daniels and Bon Natural

The main advantage of trading using opposite Archer Daniels and Bon Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archer Daniels 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.

The idea behind Archer Daniels Midland and Bon Natural Life 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.