Correlation Between 2G ENERGY and United Natural

Can any of the company-specific risk be diversified away by investing in both 2G ENERGY 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 2G ENERGY and United Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 2G ENERGY and United Natural Foods, you can compare the effects of market volatilities on 2G ENERGY 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 2G ENERGY with a short position of United Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of 2G ENERGY and United Natural.

Diversification Opportunities for 2G ENERGY and United Natural

0.61

Correlation Coefficient

2G ENERGY  United Natural

Poor diversification

The 3 months correlation between 2GB and United is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding 2G ENERGY 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 2G ENERGY 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 2G ENERGY 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 2G ENERGY i.e., 2G ENERGY and United Natural go up and down completely randomly.

Pair Corralation between 2G ENERGY and United Natural

Assuming the 90 days trading horizon 2G ENERGY is expected to generate 0.56 times more return on investment than United Natural. However, 2G ENERGY is 1.77 times less risky than United Natural. It trades about 0.01 of its potential returns per unit of risk. United Natural Foods is currently generating about -0.01 per unit of risk. If you would invest  2,220  in 2G ENERGY on September 1, 2024 and sell it today you would lose (25.00) from holding 2G ENERGY or give up 1.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.78%
Values	Daily Returns

2G ENERGY   vs.  United Natural Foods

2G ENERGY

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 2G ENERGY are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, 2G ENERGY may actually be approaching a critical reversion point that can send shares even higher in December 2024.

United Natural Foods

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Natural reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 2G ENERGY and United Natural

The main advantage of trading using opposite 2G ENERGY and United Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 2G ENERGY 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 2G ENERGY 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.