Correlation Between Ford and United Natural

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

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

Diversification Opportunities for Ford and United Natural

0.41

Correlation Coefficient

Ford  United Natural

Very weak diversification

The 3 months correlation between Ford and United is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and United Natural go up and down completely randomly.

Pair Corralation between Ford and United Natural

Taking into account the 90-day investment horizon Ford is expected to generate 12.28 times less return on investment than United Natural. But when comparing it to its historical volatility, Ford Motor is 2.39 times less risky than United Natural. It trades about 0.03 of its potential returns per unit of risk. United Natural Foods is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,620  in United Natural Foods on September 2, 2024 and sell it today you would earn a total of  863.00  from holding United Natural Foods or generate 53.27% return on investment over 90 days.

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

Ford Motor  vs.  United Natural Foods

Ford Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

United Natural Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods are ranked lower than 12 (%) 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 Ford and United Natural

The main advantage of trading using opposite Ford and United Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.