Correlation Between Seneca Foods and Lamb Weston

Can any of the company-specific risk be diversified away by investing in both Seneca Foods and Lamb Weston 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 Lamb Weston 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 Lamb Weston Holdings, you can compare the effects of market volatilities on Seneca Foods and Lamb Weston 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 Lamb Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seneca Foods and Lamb Weston.

Diversification Opportunities for Seneca Foods and Lamb Weston

0.53

Correlation Coefficient

Seneca Foods  Lamb Weston

Very weak diversification

The 3 months correlation between Seneca and Lamb is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Seneca Foods Corp and Lamb Weston Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamb Weston Holdings 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 Lamb Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamb Weston Holdings has no effect on the direction of Seneca Foods i.e., Seneca Foods and Lamb Weston go up and down completely randomly.

Pair Corralation between Seneca Foods and Lamb Weston

Assuming the 90 days horizon Seneca Foods Corp is expected to generate 0.92 times more return on investment than Lamb Weston. However, Seneca Foods Corp is 1.09 times less risky than Lamb Weston. It trades about 0.26 of its potential returns per unit of risk. Lamb Weston Holdings is currently generating about 0.1 per unit of risk. If you would invest  6,993  in Seneca Foods Corp on September 20, 2024 and sell it today you would earn a total of  819.00  from holding Seneca Foods Corp or generate 11.71% return on investment over 90 days.

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

Seneca Foods Corp  vs.  Lamb Weston Holdings

Seneca Foods Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Seneca Foods Corp are ranked lower than 17 (%) 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.

Lamb Weston Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lamb Weston Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Lamb Weston showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seneca Foods and Lamb Weston

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

The idea behind Seneca Foods Corp and Lamb Weston Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.