Correlation Between Chefs Warehouse and United Natural

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

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

Diversification Opportunities for Chefs Warehouse and United Natural

0.94

Correlation Coefficient

Chefs Warehouse  United Natural

Almost no diversification

The 3 months correlation between Chefs and United is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding The Chefs Warehouse 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 Chefs Warehouse 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 The Chefs Warehouse 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 Chefs Warehouse i.e., Chefs Warehouse and United Natural go up and down completely randomly.

Pair Corralation between Chefs Warehouse and United Natural

Given the investment horizon of 90 days Chefs Warehouse is expected to generate 1.06 times less return on investment than United Natural. But when comparing it to its historical volatility, The Chefs Warehouse is 1.82 times less risky than United Natural. It trades about 0.35 of its potential returns per unit of risk. United Natural Foods is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,284  in United Natural Foods on November 20, 2024 and sell it today you would earn a total of  1,116  from holding United Natural Foods or generate 48.86% return on investment over 90 days.

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

The Chefs Warehouse  vs.  United Natural Foods

Chefs Warehouse

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in The Chefs Warehouse are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Chefs Warehouse reported solid returns over the last few months and may actually be approaching a breakup point.

United Natural Foods

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, United Natural demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chefs Warehouse and United Natural

The main advantage of trading using opposite Chefs Warehouse and United Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chefs Warehouse 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 The Chefs Warehouse 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.