Correlation Between United Natural and Sea

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

Diversification Opportunities for United Natural and Sea

0.19

Correlation Coefficient

United Natural  Sea

Average diversification

The 3 months correlation between United and Sea is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods, and Sea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Limited 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Limited has no effect on the direction of United Natural i.e., United Natural and Sea go up and down completely randomly.

Pair Corralation between United Natural and Sea

Assuming the 90 days trading horizon United Natural Foods, is expected to under-perform the Sea. In addition to that, United Natural is 1.07 times more volatile than Sea Limited. It trades about -0.02 of its total potential returns per unit of risk. Sea Limited is currently generating about 0.06 per unit of volatility. If you would invest  2,691  in Sea Limited on December 24, 2024 and sell it today you would earn a total of  268.00  from holding Sea Limited or generate 9.96% 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.  Sea Limited

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.

Sea Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Sea sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Natural and Sea

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

The idea behind United Natural Foods, and Sea Limited 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.