Correlation Between CosmoSteel Holdings and SENECA FOODS

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

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

Diversification Opportunities for CosmoSteel Holdings and SENECA FOODS

0.41

Correlation Coefficient

CosmoSteel Holdings  SENECA FOODS

Very weak diversification

The 3 months correlation between CosmoSteel and SENECA is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding CosmoSteel Holdings Limited 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 CosmoSteel Holdings 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 CosmoSteel Holdings Limited 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 CosmoSteel Holdings i.e., CosmoSteel Holdings and SENECA FOODS go up and down completely randomly.

Pair Corralation between CosmoSteel Holdings and SENECA FOODS

Assuming the 90 days horizon CosmoSteel Holdings Limited is expected to generate 1.87 times more return on investment than SENECA FOODS. However, CosmoSteel Holdings is 1.87 times more volatile than SENECA FOODS A. It trades about 0.21 of its potential returns per unit of risk. SENECA FOODS A is currently generating about 0.26 per unit of risk. If you would invest  6.05  in CosmoSteel Holdings Limited on September 22, 2024 and sell it today you would earn a total of  1.15  from holding CosmoSteel Holdings Limited or generate 19.01% return on investment over 90 days.

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

CosmoSteel Holdings Limited  vs.  SENECA FOODS A

CosmoSteel Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CosmoSteel Holdings Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CosmoSteel Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

SENECA FOODS A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady 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 CosmoSteel Holdings and SENECA FOODS

The main advantage of trading using opposite CosmoSteel Holdings and SENECA FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CosmoSteel Holdings 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 CosmoSteel Holdings Limited 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 Global Correlations module to find global opportunities by holding instruments from different markets.