Correlation Between United Natural and Bridgford Foods

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

Diversification Opportunities for United Natural and Bridgford Foods

0.92

Correlation Coefficient

United Natural  Bridgford Foods

Almost no diversification

The 3 months correlation between United and Bridgford is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and Bridgford Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgford Foods 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 Bridgford Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgford Foods has no effect on the direction of United Natural i.e., United Natural and Bridgford Foods go up and down completely randomly.

Pair Corralation between United Natural and Bridgford Foods

Given the investment horizon of 90 days United Natural Foods is expected to under-perform the Bridgford Foods. In addition to that, United Natural is 1.48 times more volatile than Bridgford Foods. It trades about -0.04 of its total potential returns per unit of risk. Bridgford Foods is currently generating about 0.08 per unit of volatility. If you would invest  1,036  in Bridgford Foods on October 11, 2024 and sell it today you would earn a total of  28.00  from holding Bridgford Foods or generate 2.7% return on investment over 90 days.

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

United Natural Foods  vs.  Bridgford Foods

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 fairly fragile technical and fundamental indicators, United Natural demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Bridgford Foods

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgford Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Bridgford Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Natural and Bridgford Foods

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

The idea behind United Natural Foods and Bridgford Foods 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 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.