Correlation Between United Natural and TESCO PLC
Can any of the company-specific risk be diversified away by investing in both United Natural and TESCO PLC 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 TESCO PLC 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 TESCO PLC LS 0633333, you can compare the effects of market volatilities on United Natural and TESCO PLC 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 TESCO PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Natural and TESCO PLC.
Diversification Opportunities for United Natural and TESCO PLC
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and TESCO is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and TESCO PLC LS 0633333 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TESCO PLC LS 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 TESCO PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TESCO PLC LS has no effect on the direction of United Natural i.e., United Natural and TESCO PLC go up and down completely randomly.
Pair Corralation between United Natural and TESCO PLC
Assuming the 90 days horizon United Natural is expected to generate 2.28 times less return on investment than TESCO PLC. In addition to that, United Natural is 2.48 times more volatile than TESCO PLC LS 0633333. It trades about 0.01 of its total potential returns per unit of risk. TESCO PLC LS 0633333 is currently generating about 0.06 per unit of volatility. If you would invest 301.00 in TESCO PLC LS 0633333 on August 26, 2024 and sell it today you would earn a total of 125.00 from holding TESCO PLC LS 0633333 or generate 41.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Natural Foods vs. TESCO PLC LS 0633333
Performance |
| Timeline |
| United Natural Foods |
| TESCO PLC LS |
United Natural and TESCO PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Natural and TESCO PLC
The main advantage of trading using opposite United Natural and TESCO PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Natural position performs unexpectedly, TESCO PLC 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 TESCO PLC will offset losses from the drop in TESCO PLC's long position.| United Natural vs. Sysco | United Natural vs. Jernimo Martins SGPS | United Natural vs. Bunzl plc | United Natural vs. Performance Food Group |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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