Correlation Between Canadian Utilities and SENECA FOODS

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

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

Diversification Opportunities for Canadian Utilities and SENECA FOODS

0.46

Correlation Coefficient

Canadian Utilities  SENECA FOODS

Very weak diversification

The 3 months correlation between Canadian and SENECA is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities 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 Canadian Utilities 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 Canadian Utilities 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 Canadian Utilities i.e., Canadian Utilities and SENECA FOODS go up and down completely randomly.

Pair Corralation between Canadian Utilities and SENECA FOODS

Assuming the 90 days horizon Canadian Utilities is expected to generate 2.71 times less return on investment than SENECA FOODS. But when comparing it to its historical volatility, Canadian Utilities Limited is 1.93 times less risky than SENECA FOODS. It trades about 0.06 of its potential returns per unit of risk. SENECA FOODS A is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,480  in SENECA FOODS A on September 28, 2024 and sell it today you would earn a total of  2,620  from holding SENECA FOODS A or generate 58.48% return on investment over 90 days.

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

Canadian Utilities Limited  vs.  SENECA FOODS A

Canadian Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canadian Utilities Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Canadian Utilities 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

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 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 Canadian Utilities and SENECA FOODS

The main advantage of trading using opposite Canadian Utilities and SENECA FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities 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 Canadian Utilities 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.