Correlation Between United Natural and Check Point

Can any of the company-specific risk be diversified away by investing in both United Natural and Check Point 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 Check Point 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 Check Point Software, you can compare the effects of market volatilities on United Natural and Check Point 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 Check Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Natural and Check Point.

Diversification Opportunities for United Natural and Check Point

0.81

Correlation Coefficient

United Natural  Check Point

Very poor diversification

The 3 months correlation between United and Check is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods, and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software 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 Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of United Natural i.e., United Natural and Check Point go up and down completely randomly.

Pair Corralation between United Natural and Check Point

Assuming the 90 days trading horizon United Natural Foods, is expected to generate 1.76 times more return on investment than Check Point. However, United Natural is 1.76 times more volatile than Check Point Software. It trades about 0.18 of its potential returns per unit of risk. Check Point Software is currently generating about 0.26 per unit of risk. If you would invest  3,114  in United Natural Foods, on October 7, 2024 and sell it today you would earn a total of  1,065  from holding United Natural Foods, or generate 34.2% return on investment over 90 days.

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

United Natural Foods,  vs.  Check Point Software

United Natural Foods,

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods, are ranked lower than 15 (%) 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.

Check Point Software

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Check Point sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Natural and Check Point

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

The idea behind United Natural Foods, and Check Point Software 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.