Correlation Between United Natural and Vital Farms

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

Diversification Opportunities for United Natural and Vital Farms

0.23

Correlation Coefficient

United Natural  Vital Farms

Modest diversification

The 3 months correlation between United and Vital is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding United Natural Foods and Vital Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Farms 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 Vital Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vital Farms has no effect on the direction of United Natural i.e., United Natural and Vital Farms go up and down completely randomly.

Pair Corralation between United Natural and Vital Farms

Given the investment horizon of 90 days United Natural Foods is expected to generate 1.91 times more return on investment than Vital Farms. However, United Natural is 1.91 times more volatile than Vital Farms. It trades about 0.17 of its potential returns per unit of risk. Vital Farms is currently generating about 0.04 per unit of risk. If you would invest  2,468  in United Natural Foods on October 10, 2024 and sell it today you would earn a total of  397.00  from holding United Natural Foods or generate 16.09% return on investment over 90 days.

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

United Natural Foods  vs.  Vital Farms

United Natural Foods

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods are ranked lower than 14 (%) 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.

Vital Farms

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vital Farms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Vital Farms is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with United Natural and Vital Farms

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

The idea behind United Natural Foods and Vital Farms 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..