Correlation Between United Natural and SHIN ETSU

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

Diversification Opportunities for United Natural and SHIN ETSU

-0.71

Correlation Coefficient

United Natural  SHIN ETSU

Pay attention - limited upside

The 3 months correlation between United and SHIN is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and SHIN ETSU CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIN ETSU CHEMICAL 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 SHIN ETSU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIN ETSU CHEMICAL has no effect on the direction of United Natural i.e., United Natural and SHIN ETSU go up and down completely randomly.

Pair Corralation between United Natural and SHIN ETSU

Assuming the 90 days horizon United Natural Foods is expected to generate 1.83 times more return on investment than SHIN ETSU. However, United Natural is 1.83 times more volatile than SHIN ETSU CHEMICAL. It trades about 0.11 of its potential returns per unit of risk. SHIN ETSU CHEMICAL is currently generating about -0.05 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	Weak
Accuracy	100.0%
Values	Daily Returns

United Natural Foods  vs.  SHIN ETSU CHEMICAL

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.

SHIN ETSU CHEMICAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHIN ETSU CHEMICAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with United Natural and SHIN ETSU

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

The idea behind United Natural Foods and SHIN ETSU CHEMICAL 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.