Correlation Between United Natural and Cars

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

Diversification Opportunities for United Natural and Cars

-0.53

Correlation Coefficient

United Natural  Cars

Excellent diversification

The 3 months correlation between United and Cars is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of United Natural i.e., United Natural and Cars go up and down completely randomly.

Pair Corralation between United Natural and Cars

Assuming the 90 days horizon United Natural Foods is expected to generate 1.38 times more return on investment than Cars. However, United Natural is 1.38 times more volatile than Cars Inc. It trades about 0.02 of its potential returns per unit of risk. Cars Inc is currently generating about 0.01 per unit of risk. If you would invest  2,727  in United Natural Foods on November 29, 2024 and sell it today you would earn a total of  209.00  from holding United Natural Foods or generate 7.66% return on investment over 90 days.

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

United Natural Foods  vs.  Cars Inc

United Natural Foods

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods are ranked lower than 9 (%) 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.

Cars Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cars Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with United Natural and Cars

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

The idea behind United Natural Foods and Cars Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.