Correlation Between United Natural and DBS GROUP

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

Diversification Opportunities for United Natural and DBS GROUP

0.86

Correlation Coefficient

United Natural  DBS GROUP

Very poor diversification

The 3 months correlation between United and DBS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and DBS GROUP HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBS GROUP HLDGS 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 DBS GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBS GROUP HLDGS has no effect on the direction of United Natural i.e., United Natural and DBS GROUP go up and down completely randomly.

Pair Corralation between United Natural and DBS GROUP

Assuming the 90 days horizon United Natural is expected to generate 1.61 times less return on investment than DBS GROUP. In addition to that, United Natural is 1.98 times more volatile than DBS GROUP HLDGS. It trades about 0.03 of its total potential returns per unit of risk. DBS GROUP HLDGS is currently generating about 0.09 per unit of volatility. If you would invest  3,067  in DBS GROUP HLDGS on October 26, 2024 and sell it today you would earn a total of  49.00  from holding DBS GROUP HLDGS or generate 1.6% return on investment over 90 days.

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

United Natural Foods  vs.  DBS GROUP HLDGS

United Natural Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods are ranked lower than 12 (%) 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.

DBS GROUP HLDGS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DBS GROUP HLDGS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, DBS GROUP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Natural and DBS GROUP

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

The idea behind United Natural Foods and DBS GROUP HLDGS 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.