Correlation Between United Natural and AMCON Distributing

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

Diversification Opportunities for United Natural and AMCON Distributing

0.34

Correlation Coefficient

United Natural  AMCON Distributing

Weak diversification

The 3 months correlation between United and AMCON is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and AMCON Distributing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMCON Distributing 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 AMCON Distributing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMCON Distributing has no effect on the direction of United Natural i.e., United Natural and AMCON Distributing go up and down completely randomly.

Pair Corralation between United Natural and AMCON Distributing

Given the investment horizon of 90 days United Natural Foods is expected to generate 0.71 times more return on investment than AMCON Distributing. However, United Natural Foods is 1.4 times less risky than AMCON Distributing. It trades about 0.01 of its potential returns per unit of risk. AMCON Distributing is currently generating about -0.02 per unit of risk. If you would invest  2,720  in United Natural Foods on December 28, 2024 and sell it today you would lose (23.00) from holding United Natural Foods or give up 0.85% of portfolio value over 90 days.

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

United Natural Foods  vs.  AMCON Distributing

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 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.

AMCON Distributing

Risk-Adjusted Performance

Very Weak

Over the last 90 days AMCON Distributing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, AMCON Distributing is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United Natural and AMCON Distributing

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

The idea behind United Natural Foods and AMCON Distributing 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.