Correlation Between United Natural and Illinois Tool
Can any of the company-specific risk be diversified away by investing in both United Natural and Illinois Tool 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 Illinois Tool 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 Illinois Tool Works, you can compare the effects of market volatilities on United Natural and Illinois Tool 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 Illinois Tool. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Natural and Illinois Tool.
Diversification Opportunities for United Natural and Illinois Tool
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Illinois is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and Illinois Tool Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illinois Tool Works 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 Illinois Tool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illinois Tool Works has no effect on the direction of United Natural i.e., United Natural and Illinois Tool go up and down completely randomly.
Pair Corralation between United Natural and Illinois Tool
Assuming the 90 days horizon United Natural Foods is expected to generate 3.71 times more return on investment than Illinois Tool. However, United Natural is 3.71 times more volatile than Illinois Tool Works. It trades about 0.14 of its potential returns per unit of risk. Illinois Tool Works is currently generating about 0.12 per unit of risk. If you would invest 1,068 in United Natural Foods on August 25, 2024 and sell it today you would earn a total of 1,055 from holding United Natural Foods or generate 98.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.24% |
| Values | Daily Returns |
United Natural Foods vs. Illinois Tool Works
Performance |
| Timeline |
| United Natural Foods |
| Illinois Tool Works |
United Natural and Illinois Tool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Natural and Illinois Tool
The main advantage of trading using opposite United Natural and Illinois Tool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Natural position performs unexpectedly, Illinois Tool 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 Illinois Tool will offset losses from the drop in Illinois Tool's long position.| United Natural vs. Sysco | United Natural vs. Jernimo Martins SGPS | United Natural vs. Bunzl plc | United Natural vs. Performance Food Group |
| Illinois Tool vs. Superior Plus Corp | Illinois Tool vs. NMI Holdings | Illinois Tool vs. Origin Agritech | Illinois Tool vs. SIVERS SEMICONDUCTORS AB |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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