Correlation Between FIRSTRAND and United Natural
Can any of the company-specific risk be diversified away by investing in both FIRSTRAND 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 FIRSTRAND and United Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FIRSTRAND and United Natural Foods, you can compare the effects of market volatilities on FIRSTRAND 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 FIRSTRAND with a short position of United Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIRSTRAND and United Natural.
Diversification Opportunities for FIRSTRAND and United Natural
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between FIRSTRAND and United is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding FIRSTRAND 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 FIRSTRAND 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 FIRSTRAND 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 FIRSTRAND i.e., FIRSTRAND and United Natural go up and down completely randomly.
Pair Corralation between FIRSTRAND and United Natural
Assuming the 90 days trading horizon FIRSTRAND is expected to generate 31.85 times less return on investment than United Natural. But when comparing it to its historical volatility, FIRSTRAND is 1.77 times less risky than United Natural. It trades about 0.02 of its potential returns per unit of risk. United Natural Foods is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 1,832 in United Natural Foods on September 2, 2024 and sell it today you would earn a total of 458.00 from holding United Natural Foods or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FIRSTRAND vs. United Natural Foods
Performance |
| Timeline |
| FIRSTRAND |
| United Natural Foods |
FIRSTRAND and United Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FIRSTRAND and United Natural
The main advantage of trading using opposite FIRSTRAND and United Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIRSTRAND 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.| FIRSTRAND vs. INTERSHOP Communications Aktiengesellschaft | FIRSTRAND vs. Mobilezone Holding AG | FIRSTRAND vs. BOS BETTER ONLINE | FIRSTRAND vs. Ribbon Communications |
| United Natural vs. STRAYER EDUCATION | United Natural vs. PSI Software AG | United Natural vs. Strategic Education | United Natural vs. ATOSS SOFTWARE |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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