Correlation Between United Natural and Microsoft
Can any of the company-specific risk be diversified away by investing in both United Natural and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on United Natural and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Natural and Microsoft.
Diversification Opportunities for United Natural and Microsoft
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Microsoft is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of United Natural i.e., United Natural and Microsoft go up and down completely randomly.
Pair Corralation between United Natural and Microsoft
Assuming the 90 days horizon United Natural Foods is expected to generate 1.97 times more return on investment than Microsoft. However, United Natural is 1.97 times more volatile than Microsoft. It trades about 0.39 of its potential returns per unit of risk. Microsoft is currently generating about 0.25 per unit of risk. If you would invest 1,852 in United Natural Foods on September 3, 2024 and sell it today you would earn a total of 438.00 from holding United Natural Foods or generate 23.65% 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. Microsoft
Performance |
| Timeline |
| United Natural Foods |
| Microsoft |
United Natural and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Natural and Microsoft
The main advantage of trading using opposite United Natural and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Natural position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| United Natural vs. Performance Food Group | United Natural vs. Superior Plus Corp | United Natural vs. NMI Holdings | United Natural vs. Origin Agritech |
| Microsoft vs. Collins Foods Limited | Microsoft vs. United Natural Foods | Microsoft vs. USU Software AG | Microsoft vs. National Beverage Corp |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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