Correlation Between United Natural and KINDER

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

Diversification Opportunities for United Natural and KINDER

0.45

Correlation Coefficient

United Natural  KINDER

Very weak diversification

The 3 months correlation between United and KINDER is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and KINDER MORGAN ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN ENERGY 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN ENERGY has no effect on the direction of United Natural i.e., United Natural and KINDER go up and down completely randomly.

Pair Corralation between United Natural and KINDER

Given the investment horizon of 90 days United Natural Foods is expected to generate 2.88 times more return on investment than KINDER. However, United Natural is 2.88 times more volatile than KINDER MORGAN ENERGY. It trades about 0.03 of its potential returns per unit of risk. KINDER MORGAN ENERGY is currently generating about 0.07 per unit of risk. If you would invest  2,565  in United Natural Foods on December 23, 2024 and sell it today you would earn a total of  54.00  from holding United Natural Foods or generate 2.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

United Natural Foods  vs.  KINDER MORGAN ENERGY

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 2 (%) 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.

KINDER MORGAN ENERGY

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KINDER MORGAN ENERGY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, KINDER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Natural and KINDER

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

The idea behind United Natural Foods and KINDER MORGAN ENERGY 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.