Correlation Between VARIOUS EATERIES and United Natural

Can any of the company-specific risk be diversified away by investing in both VARIOUS EATERIES and United Natural 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 VARIOUS EATERIES and United Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VARIOUS EATERIES LS and United Natural Foods, you can compare the effects of market volatilities on VARIOUS EATERIES and United Natural 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 VARIOUS EATERIES with a short position of United Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of VARIOUS EATERIES and United Natural.

Diversification Opportunities for VARIOUS EATERIES and United Natural

0.24

Correlation Coefficient

VARIOUS EATERIES  United Natural

Modest diversification

The 3 months correlation between VARIOUS and United is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding VARIOUS EATERIES LS and United Natural Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural Foods and VARIOUS EATERIES 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 VARIOUS EATERIES LS are associated (or correlated) with United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods has no effect on the direction of VARIOUS EATERIES i.e., VARIOUS EATERIES and United Natural go up and down completely randomly.

Pair Corralation between VARIOUS EATERIES and United Natural

Assuming the 90 days horizon VARIOUS EATERIES LS is expected to under-perform the United Natural. In addition to that, VARIOUS EATERIES is 1.45 times more volatile than United Natural Foods. It trades about -0.13 of its total potential returns per unit of risk. United Natural Foods is currently generating about 0.0 per unit of volatility. If you would invest  2,531  in United Natural Foods on December 30, 2024 and sell it today you would lose (81.00) from holding United Natural Foods or give up 3.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

VARIOUS EATERIES LS  vs.  United Natural Foods

VARIOUS EATERIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days VARIOUS EATERIES LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

United Natural Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Natural Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, United Natural is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VARIOUS EATERIES and United Natural

The main advantage of trading using opposite VARIOUS EATERIES and United Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VARIOUS EATERIES position performs unexpectedly, United Natural 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 United Natural will offset losses from the drop in United Natural's long position.

The idea behind VARIOUS EATERIES LS and United Natural Foods pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.