Correlation Between United Natural and Industrial
Can any of the company-specific risk be diversified away by investing in both United Natural and Industrial 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 United Natural and Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Natural Foods and Industrial and Commercial, you can compare the effects of market volatilities on United Natural and Industrial 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 United Natural with a short position of Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Natural and Industrial.
Diversification Opportunities for United Natural and Industrial
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Industrial is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial and United 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 United Natural Foods are associated (or correlated) with Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of United Natural i.e., United Natural and Industrial go up and down completely randomly.
Pair Corralation between United Natural and Industrial
Assuming the 90 days horizon United Natural Foods is expected to generate 0.98 times more return on investment than Industrial. However, United Natural Foods is 1.02 times less risky than Industrial. It trades about 0.35 of its potential returns per unit of risk. Industrial and Commercial is currently generating about -0.02 per unit of risk. If you would invest 1,875 in United Natural Foods on August 31, 2024 and sell it today you would earn a total of 423.00 from holding United Natural Foods or generate 22.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Natural Foods vs. Industrial and Commercial
Performance |
| Timeline |
| United Natural Foods |
| Industrial and Commercial |
United Natural and Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Natural and Industrial
The main advantage of trading using opposite United Natural and Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Natural position performs unexpectedly, Industrial 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 Industrial will offset losses from the drop in Industrial's long position.| United Natural vs. Charter Communications | United Natural vs. Perseus Mining Limited | United Natural vs. Jacquet Metal Service | United Natural vs. SBA Communications Corp |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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