Correlation Between Vital Farms and United Natural

Can any of the company-specific risk be diversified away by investing in both Vital Farms and United Natural 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 Vital Farms and United Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vital Farms and United Natural Foods, you can compare the effects of market volatilities on Vital Farms and United Natural 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 Vital Farms with a short position of United Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vital Farms and United Natural.

Diversification Opportunities for Vital Farms and United Natural

0.23

Correlation Coefficient

Vital Farms  United Natural

Modest diversification

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

Pair Corralation between Vital Farms and United Natural

Given the investment horizon of 90 days Vital Farms is expected to generate 7.23 times less return on investment than United Natural. But when comparing it to its historical volatility, Vital Farms is 1.91 times less risky than United Natural. It trades about 0.04 of its potential returns per unit of risk. United Natural Foods is currently generating about 0.17 of returns per unit of risk over similar time horizon. 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

Vital Farms  vs.  United Natural Foods

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.

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.

Pair Trading with Vital Farms and United Natural

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

The idea behind Vital Farms and United Natural 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.