Correlation Between United Natural and BK Technologies

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

Diversification Opportunities for United Natural and BK Technologies

0.74

Correlation Coefficient

United Natural  BK Technologies

Poor diversification

The 3 months correlation between United and BKTI is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and BK Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BK Technologies 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 BK Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BK Technologies has no effect on the direction of United Natural i.e., United Natural and BK Technologies go up and down completely randomly.

Pair Corralation between United Natural and BK Technologies

Given the investment horizon of 90 days United Natural Foods is expected to generate 0.81 times more return on investment than BK Technologies. However, United Natural Foods is 1.24 times less risky than BK Technologies. It trades about 0.15 of its potential returns per unit of risk. BK Technologies is currently generating about 0.1 per unit of risk. If you would invest  2,087  in United Natural Foods on October 26, 2024 and sell it today you would earn a total of  670.00  from holding United Natural Foods or generate 32.1% return on investment over 90 days.

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

United Natural Foods  vs.  BK Technologies

United Natural Foods

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, United Natural demonstrated solid returns over the last few months and may actually be approaching a breakup point.

BK Technologies

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BK Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, BK Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Natural and BK Technologies

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

The idea behind United Natural Foods and BK Technologies 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.