Correlation Between United Natural and Digi International

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

Diversification Opportunities for United Natural and Digi International

0.57

Correlation Coefficient

United Natural  Digi International

Very weak diversification

The 3 months correlation between United and Digi is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and Digi International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digi International 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 Digi International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digi International has no effect on the direction of United Natural i.e., United Natural and Digi International go up and down completely randomly.

Pair Corralation between United Natural and Digi International

Given the investment horizon of 90 days United Natural Foods is expected to generate 1.0 times more return on investment than Digi International. However, United Natural Foods is 1.0 times less risky than Digi International. It trades about 0.01 of its potential returns per unit of risk. Digi International is currently generating about -0.04 per unit of risk. If you would invest  2,621  in United Natural Foods on December 19, 2024 and sell it today you would lose (7.00) from holding United Natural Foods or give up 0.27% of portfolio value over 90 days.

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

United Natural Foods  vs.  Digi International

United Natural Foods

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, United Natural is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Digi International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digi International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with United Natural and Digi International

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

The idea behind United Natural Foods and Digi International 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.