Correlation Between NIPPON MEAT and SENECA FOODS-A

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

Diversification Opportunities for NIPPON MEAT and SENECA FOODS-A

-0.61

Correlation Coefficient

NIPPON MEAT  SENECA FOODS-A

Excellent diversification

The 3 months correlation between NIPPON and SENECA is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON MEAT PACKERS 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 NIPPON MEAT 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 NIPPON MEAT PACKERS 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 NIPPON MEAT i.e., NIPPON MEAT and SENECA FOODS-A go up and down completely randomly.

Pair Corralation between NIPPON MEAT and SENECA FOODS-A

Assuming the 90 days trading horizon NIPPON MEAT PACKERS is expected to under-perform the SENECA FOODS-A. But the stock apears to be less risky and, when comparing its historical volatility, NIPPON MEAT PACKERS is 1.73 times less risky than SENECA FOODS-A. The stock trades about -0.03 of its potential returns per unit of risk. The SENECA FOODS A is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,250  in SENECA FOODS A on August 31, 2024 and sell it today you would earn a total of  1,250  from holding SENECA FOODS A or generate 23.81% return on investment over 90 days.

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

NIPPON MEAT PACKERS  vs.  SENECA FOODS A

NIPPON MEAT PACKERS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIPPON MEAT PACKERS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, NIPPON MEAT is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SENECA FOODS A

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 10 (%) 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 NIPPON MEAT and SENECA FOODS-A

The main advantage of trading using opposite NIPPON MEAT and SENECA FOODS-A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIPPON MEAT 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 NIPPON MEAT PACKERS 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.