Correlation Between United Natural and Este Lauder
Can any of the company-specific risk be diversified away by investing in both United Natural and Este Lauder 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 Este Lauder 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 The Este Lauder, you can compare the effects of market volatilities on United Natural and Este Lauder 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 Este Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Natural and Este Lauder.
Diversification Opportunities for United Natural and Este Lauder
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between United and Este is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods, and The Este Lauder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Este Lauder 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 Este Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Este Lauder has no effect on the direction of United Natural i.e., United Natural and Este Lauder go up and down completely randomly.
Pair Corralation between United Natural and Este Lauder
Assuming the 90 days trading horizon United Natural Foods, is expected to generate 4.94 times more return on investment than Este Lauder. However, United Natural is 4.94 times more volatile than The Este Lauder. It trades about 0.15 of its potential returns per unit of risk. The Este Lauder is currently generating about -0.65 per unit of risk. If you would invest 3,660 in United Natural Foods, on October 8, 2024 and sell it today you would earn a total of 519.00 from holding United Natural Foods, or generate 14.18% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
United Natural Foods, vs. The Este Lauder
Performance |
Timeline |
United Natural Foods, |
Este Lauder |
United Natural and Este Lauder Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United Natural and Este Lauder
The main advantage of trading using opposite United Natural and Este Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Natural position performs unexpectedly, Este Lauder 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 Este Lauder will offset losses from the drop in Este Lauder's long position.United Natural vs. Taiwan Semiconductor Manufacturing | United Natural vs. Apple Inc | United Natural vs. Alibaba Group Holding | United Natural vs. Banco Santander Chile |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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