Correlation Between Transport International and SENECA FOODS-A

Can any of the company-specific risk be diversified away by investing in both Transport International 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 Transport International 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 Transport International Holdings and SENECA FOODS A, you can compare the effects of market volatilities on Transport International 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 Transport International with a short position of SENECA FOODS-A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport International and SENECA FOODS-A.

Diversification Opportunities for Transport International and SENECA FOODS-A

-0.45

Correlation Coefficient

Transport International  SENECA FOODS-A

Very good diversification

The 3 months correlation between Transport and SENECA is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin 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 Transport International 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 Transport International Holdings 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 Transport International i.e., Transport International and SENECA FOODS-A go up and down completely randomly.

Pair Corralation between Transport International and SENECA FOODS-A

Assuming the 90 days horizon Transport International is expected to generate 68.3 times less return on investment than SENECA FOODS-A. But when comparing it to its historical volatility, Transport International Holdings is 1.84 times less risky than SENECA FOODS-A. It trades about 0.01 of its potential returns per unit of risk. SENECA FOODS A is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  6,700  in SENECA FOODS A on October 6, 2024 and sell it today you would earn a total of  650.00  from holding SENECA FOODS A or generate 9.7% return on investment over 90 days.

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

Transport International Holdin  vs.  SENECA FOODS A

Transport International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Transport International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SENECA FOODS A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, SENECA FOODS-A exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transport International and SENECA FOODS-A

The main advantage of trading using opposite Transport International and SENECA FOODS-A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport International 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 Transport International Holdings 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.