Correlation Between United Natural and Ecolab

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

Diversification Opportunities for United Natural and Ecolab

0.65

Correlation Coefficient

United Natural  Ecolab

Poor diversification

The 3 months correlation between United and Ecolab is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab 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 Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of United Natural i.e., United Natural and Ecolab go up and down completely randomly.

Pair Corralation between United Natural and Ecolab

Assuming the 90 days horizon United Natural is expected to generate 196.0 times less return on investment than Ecolab. In addition to that, United Natural is 2.46 times more volatile than Ecolab Inc. It trades about 0.0 of its total potential returns per unit of risk. Ecolab Inc is currently generating about 0.04 per unit of volatility. If you would invest  22,631  in Ecolab Inc on December 29, 2024 and sell it today you would earn a total of  739.00  from holding Ecolab Inc or generate 3.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

United Natural Foods  vs.  Ecolab Inc

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Ecolab Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ecolab is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with United Natural and Ecolab

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

The idea behind United Natural Foods and Ecolab 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.