Correlation Between United Natural and CONSOL Energy

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

Diversification Opportunities for United Natural and CONSOL Energy

-0.08

Correlation Coefficient

United Natural  CONSOL Energy

Good diversification

The 3 months correlation between United and CONSOL is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and CONSOL Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSOL Energy 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 CONSOL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSOL Energy has no effect on the direction of United Natural i.e., United Natural and CONSOL Energy go up and down completely randomly.

Pair Corralation between United Natural and CONSOL Energy

Assuming the 90 days horizon United Natural Foods is expected to generate 0.67 times more return on investment than CONSOL Energy. However, United Natural Foods is 1.49 times less risky than CONSOL Energy. It trades about 0.11 of its potential returns per unit of risk. CONSOL Energy is currently generating about -0.08 per unit of risk. If you would invest  2,565  in United Natural Foods on October 25, 2024 and sell it today you would earn a total of  93.00  from holding United Natural Foods or generate 3.63% return on investment over 90 days.

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

United Natural Foods  vs.  CONSOL Energy

United Natural Foods

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Natural reported solid returns over the last few months and may actually be approaching a breakup point.

CONSOL Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSOL Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CONSOL Energy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with United Natural and CONSOL Energy

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

The idea behind United Natural Foods and CONSOL Energy 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.