Correlation Between United Natural and Honda

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

Diversification Opportunities for United Natural and Honda

-0.31

Correlation Coefficient

United Natural  Honda

Very good diversification

The 3 months correlation between United and Honda is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods, and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor 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 Honda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honda Motor has no effect on the direction of United Natural i.e., United Natural and Honda go up and down completely randomly.

Pair Corralation between United Natural and Honda

Assuming the 90 days trading horizon United Natural Foods, is expected to under-perform the Honda. In addition to that, United Natural is 1.9 times more volatile than Honda Motor Co. It trades about -0.02 of its total potential returns per unit of risk. Honda Motor Co is currently generating about -0.01 per unit of volatility. If you would invest  17,568  in Honda Motor Co on December 24, 2024 and sell it today you would lose (408.00) from holding Honda Motor Co or give up 2.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

United Natural Foods,  vs.  Honda Motor Co

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 somewhat strong basic indicators, United Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Honda Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Honda Motor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Honda is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Natural and Honda

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

The idea behind United Natural Foods, and Honda Motor Co 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.