Correlation Between Seneca Foods and Danone SA

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

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

Diversification Opportunities for Seneca Foods and Danone SA

-0.83

Correlation Coefficient

Seneca Foods  Danone SA

Pay attention - limited upside

The 3 months correlation between Seneca and Danone is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Seneca Foods Corp and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA and Seneca Foods 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 Seneca Foods Corp are associated (or correlated) with Danone SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danone SA has no effect on the direction of Seneca Foods i.e., Seneca Foods and Danone SA go up and down completely randomly.

Pair Corralation between Seneca Foods and Danone SA

Assuming the 90 days horizon Seneca Foods Corp is expected to generate 1.77 times more return on investment than Danone SA. However, Seneca Foods is 1.77 times more volatile than Danone SA. It trades about 0.2 of its potential returns per unit of risk. Danone SA is currently generating about -0.08 per unit of risk. If you would invest  6,389  in Seneca Foods Corp on September 13, 2024 and sell it today you would earn a total of  1,062  from holding Seneca Foods Corp or generate 16.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	97.67%
Values	Daily Returns

Seneca Foods Corp  vs.  Danone SA

Seneca Foods Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Seneca Foods Corp are ranked lower than 14 (%) 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.

Danone SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danone SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Seneca Foods and Danone SA

The main advantage of trading using opposite Seneca Foods and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seneca Foods position performs unexpectedly, Danone SA 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 Danone SA will offset losses from the drop in Danone SA's long position.

The idea behind Seneca Foods Corp and Danone SA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.