Correlation Between SWISS WATER and SENECA FOODS

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

By analyzing existing cross correlation between SWISS WATER DECAFFCOFFEE and SENECA FOODS A, you can compare the effects of market volatilities on SWISS WATER and SENECA FOODS 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 SWISS WATER with a short position of SENECA FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWISS WATER and SENECA FOODS.

Diversification Opportunities for SWISS WATER and SENECA FOODS

0.69

Correlation Coefficient

SWISS WATER  SENECA FOODS

Poor diversification

The 3 months correlation between SWISS and SENECA is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and SENECA FOODS A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SENECA FOODS A and SWISS WATER 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 SWISS WATER DECAFFCOFFEE are associated (or correlated) with SENECA FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SENECA FOODS A has no effect on the direction of SWISS WATER i.e., SWISS WATER and SENECA FOODS go up and down completely randomly.

Pair Corralation between SWISS WATER and SENECA FOODS

Assuming the 90 days horizon SWISS WATER is expected to generate 1.26 times less return on investment than SENECA FOODS. But when comparing it to its historical volatility, SWISS WATER DECAFFCOFFEE is 1.05 times less risky than SENECA FOODS. It trades about 0.12 of its potential returns per unit of risk. SENECA FOODS A is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,350  in SENECA FOODS A on September 16, 2024 and sell it today you would earn a total of  1,500  from holding SENECA FOODS A or generate 28.04% return on investment over 90 days.

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

SWISS WATER DECAFFCOFFEE  vs.  SENECA FOODS A

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SWISS WATER DECAFFCOFFEE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SWISS WATER reported solid returns over the last few months and may actually be approaching a breakup point.

SENECA FOODS A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, SENECA FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SWISS WATER and SENECA FOODS

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

The idea behind SWISS WATER DECAFFCOFFEE and SENECA FOODS A 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.