Correlation Between BP PLC and United Natural
Can any of the company-specific risk be diversified away by investing in both BP PLC and United 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 BP PLC and United Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP PLC DZ1 and United Natural Foods, you can compare the effects of market volatilities on BP PLC and United 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 BP PLC with a short position of United Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP PLC and United Natural.
Diversification Opportunities for BP PLC and United Natural
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BPE and United is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding BP PLC DZ1 and United Natural Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural Foods and BP PLC 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 BP PLC DZ1 are associated (or correlated) with United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods has no effect on the direction of BP PLC i.e., BP PLC and United Natural go up and down completely randomly.
Pair Corralation between BP PLC and United Natural
Assuming the 90 days horizon BP PLC is expected to generate 7.41 times less return on investment than United Natural. But when comparing it to its historical volatility, BP PLC DZ1 is 2.58 times less risky than United Natural. It trades about 0.11 of its potential returns per unit of risk. United Natural Foods is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,938 in United Natural Foods on September 13, 2024 and sell it today you would earn a total of 894.00 from holding United Natural Foods or generate 46.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BP PLC DZ1 vs. United Natural Foods
Performance |
| Timeline |
| BP PLC DZ1 |
| United Natural Foods |
BP PLC and United Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP PLC and United Natural
The main advantage of trading using opposite BP PLC and United Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP PLC position performs unexpectedly, United 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 United Natural will offset losses from the drop in United Natural's long position.The idea behind BP PLC DZ1 and United Natural 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.| United Natural vs. Metro AG | United Natural vs. Superior Plus Corp | United Natural vs. SIVERS SEMICONDUCTORS AB | United Natural vs. NorAm Drilling AS |
Check out your portfolio center.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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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