Correlation Between United Natural and Steel Dynamics
Can any of the company-specific risk be diversified away by investing in both United Natural and Steel Dynamics 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 Steel Dynamics 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 Steel Dynamics, you can compare the effects of market volatilities on United Natural and Steel Dynamics 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 Steel Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Natural and Steel Dynamics.
Diversification Opportunities for United Natural and Steel Dynamics
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between United and Steel is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and Steel Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Dynamics 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 Steel Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Dynamics has no effect on the direction of United Natural i.e., United Natural and Steel Dynamics go up and down completely randomly.
Pair Corralation between United Natural and Steel Dynamics
Assuming the 90 days horizon United Natural Foods is expected to generate 0.74 times more return on investment than Steel Dynamics. However, United Natural Foods is 1.36 times less risky than Steel Dynamics. It trades about 0.37 of its potential returns per unit of risk. Steel Dynamics is currently generating about 0.22 per unit of risk. If you would invest 1,820 in United Natural Foods on August 28, 2024 and sell it today you would earn a total of 390.00 from holding United Natural Foods or generate 21.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Natural Foods vs. Steel Dynamics
Performance |
| Timeline |
| United Natural Foods |
| Steel Dynamics |
United Natural and Steel Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Natural and Steel Dynamics
The main advantage of trading using opposite United Natural and Steel Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Natural position performs unexpectedly, Steel Dynamics 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 Steel Dynamics will offset losses from the drop in Steel Dynamics' long position.| United Natural vs. Lion One Metals | United Natural vs. LION ONE METALS | United Natural vs. GREENX METALS LTD | United Natural vs. Harmony Gold Mining |
| Steel Dynamics vs. DICKS Sporting Goods | Steel Dynamics vs. Ming Le Sports | Steel Dynamics vs. PARKEN Sport Entertainment | Steel Dynamics vs. Compagnie Plastic Omnium |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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