Correlation Between Ross Stores and United Natural

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

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

Diversification Opportunities for Ross Stores and United Natural

0.91

Correlation Coefficient

Ross Stores  United Natural

Almost no diversification

The 3 months correlation between Ross and United is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores 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 Ross Stores 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 Ross Stores 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 Ross Stores i.e., Ross Stores and United Natural go up and down completely randomly.

Pair Corralation between Ross Stores and United Natural

Assuming the 90 days trading horizon Ross Stores is expected to generate 4.6 times less return on investment than United Natural. But when comparing it to its historical volatility, Ross Stores is 2.89 times less risky than United Natural. It trades about 0.11 of its potential returns per unit of risk. United Natural Foods, is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,818  in United Natural Foods, on October 4, 2024 and sell it today you would earn a total of  1,417  from holding United Natural Foods, or generate 50.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	20.39%
Values	Daily Returns

Ross Stores  vs.  United Natural Foods,

Ross Stores

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ross Stores sustained solid returns over the last few months and may actually be approaching a breakup point.

United Natural Foods,

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods, are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United Natural sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ross Stores and United Natural

The main advantage of trading using opposite Ross Stores and United Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores 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 Ross Stores 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..