Correlation Between United Natural and CF Industries

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

Diversification Opportunities for United Natural and CF Industries

0.26

Correlation Coefficient

United Natural  CF Industries

Modest diversification

The 3 months correlation between United and C4F is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings 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 CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of United Natural i.e., United Natural and CF Industries go up and down completely randomly.

Pair Corralation between United Natural and CF Industries

Assuming the 90 days horizon United Natural Foods is expected to generate 1.28 times more return on investment than CF Industries. However, United Natural is 1.28 times more volatile than CF Industries Holdings. It trades about 0.0 of its potential returns per unit of risk. CF Industries Holdings is currently generating about -0.08 per unit of risk. If you would invest  2,531  in United Natural Foods on December 28, 2024 and sell it today you would lose (77.00) from holding United Natural Foods or give up 3.04% of portfolio value over 90 days.

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

United Natural Foods  vs.  CF Industries Holdings

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 nearly stable basic indicators, United Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CF Industries Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days CF Industries Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with United Natural and CF Industries

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

The idea behind United Natural Foods and CF Industries Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.