Correlation Between Estee Lauder and Seneca Foods

Can any of the company-specific risk be diversified away by investing in both Estee Lauder 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 Estee Lauder and Seneca Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Estee Lauder Companies and Seneca Foods Corp, you can compare the effects of market volatilities on Estee Lauder 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 Estee Lauder with a short position of Seneca Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Estee Lauder and Seneca Foods.

Diversification Opportunities for Estee Lauder and Seneca Foods

-0.62

Correlation Coefficient

Estee Lauder  Seneca Foods

Excellent diversification

The 3 months correlation between Estee and Seneca is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Estee Lauder Companies and Seneca Foods Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seneca Foods Corp and Estee Lauder 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 Estee Lauder Companies 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 Corp has no effect on the direction of Estee Lauder i.e., Estee Lauder and Seneca Foods go up and down completely randomly.

Pair Corralation between Estee Lauder and Seneca Foods

Allowing for the 90-day total investment horizon Estee Lauder Companies is expected to under-perform the Seneca Foods. In addition to that, Estee Lauder is 1.86 times more volatile than Seneca Foods Corp. It trades about -0.03 of its total potential returns per unit of risk. Seneca Foods Corp is currently generating about 0.12 per unit of volatility. If you would invest  7,938  in Seneca Foods Corp on December 28, 2024 and sell it today you would earn a total of  985.00  from holding Seneca Foods Corp or generate 12.41% return on investment over 90 days.

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

Estee Lauder Companies  vs.  Seneca Foods Corp

Estee Lauder Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Estee Lauder Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Seneca Foods Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Seneca Foods Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Seneca Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Estee Lauder and Seneca Foods

The main advantage of trading using opposite Estee Lauder and Seneca Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Estee Lauder 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' long position.

The idea behind Estee Lauder Companies and Seneca Foods Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.