Correlation Between COSTCO WHOLESALE and SENECA FOODS-A

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

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

Diversification Opportunities for COSTCO WHOLESALE and SENECA FOODS-A

0.35

Correlation Coefficient

COSTCO WHOLESALE  SENECA FOODS-A

Weak diversification

The 3 months correlation between COSTCO and SENECA is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding COSTCO WHOLESALE CDR 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 COSTCO WHOLESALE 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 COSTCO WHOLESALE CDR are associated (or correlated) with SENECA FOODS-A. 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 COSTCO WHOLESALE i.e., COSTCO WHOLESALE and SENECA FOODS-A go up and down completely randomly.

Pair Corralation between COSTCO WHOLESALE and SENECA FOODS-A

Assuming the 90 days trading horizon COSTCO WHOLESALE is expected to generate 3.83 times less return on investment than SENECA FOODS-A. But when comparing it to its historical volatility, COSTCO WHOLESALE CDR is 1.01 times less risky than SENECA FOODS-A. It trades about 0.03 of its potential returns per unit of risk. SENECA FOODS A is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,750  in SENECA FOODS A on December 3, 2024 and sell it today you would earn a total of  750.00  from holding SENECA FOODS A or generate 11.11% return on investment over 90 days.

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

COSTCO WHOLESALE CDR  vs.  SENECA FOODS A

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

Insignificant

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

SENECA FOODS A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, SENECA FOODS-A may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with COSTCO WHOLESALE and SENECA FOODS-A

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

The idea behind COSTCO WHOLESALE CDR 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.