Correlation Between NYSE Composite and Seneca Foods

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

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

Diversification Opportunities for NYSE Composite and Seneca Foods

0.12

Correlation Coefficient

NYSE Composite  Seneca Foods

Average diversification

The 3 months correlation between NYSE and Seneca is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Seneca Foods go up and down completely randomly.

Pair Corralation between NYSE Composite and Seneca Foods

Assuming the 90 days trading horizon NYSE Composite is expected to generate 31.39 times less return on investment than Seneca Foods. But when comparing it to its historical volatility, NYSE Composite is 4.92 times less risky than Seneca Foods. It trades about 0.02 of its potential returns per unit of risk. Seneca Foods Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  7,903  in Seneca Foods Corp on December 29, 2024 and sell it today you would earn a total of  1,196  from holding Seneca Foods Corp or generate 15.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	42.62%
Values	Daily Returns

NYSE Composite  vs.  Seneca Foods Corp

Pair Trading with NYSE Composite and Seneca Foods

The main advantage of trading using opposite NYSE Composite and Seneca Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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 NYSE Composite 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.