Correlation Between CDL INVESTMENT and SENECA FOODS

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

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

Diversification Opportunities for CDL INVESTMENT and SENECA FOODS

0.42

Correlation Coefficient

CDL INVESTMENT  SENECA FOODS

Very weak diversification

The 3 months correlation between CDL and SENECA is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding CDL INVESTMENT 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 CDL INVESTMENT 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 CDL INVESTMENT 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 CDL INVESTMENT i.e., CDL INVESTMENT and SENECA FOODS go up and down completely randomly.

Pair Corralation between CDL INVESTMENT and SENECA FOODS

Assuming the 90 days trading horizon CDL INVESTMENT is expected to generate 3.91 times less return on investment than SENECA FOODS. But when comparing it to its historical volatility, CDL INVESTMENT is 1.14 times less risky than SENECA FOODS. It trades about 0.04 of its potential returns per unit of risk. SENECA FOODS A is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,150  in SENECA FOODS A on September 29, 2024 and sell it today you would earn a total of  2,150  from holding SENECA FOODS A or generate 41.75% return on investment over 90 days.

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

CDL INVESTMENT  vs.  SENECA FOODS A

CDL INVESTMENT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CDL INVESTMENT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CDL INVESTMENT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SENECA FOODS A

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile 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 CDL INVESTMENT and SENECA FOODS

The main advantage of trading using opposite CDL INVESTMENT and SENECA FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDL INVESTMENT 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 CDL INVESTMENT 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.