Correlation Between Seneca Foods and Lifeway Foods

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

Diversification Opportunities for Seneca Foods and Lifeway Foods

-0.54

Correlation Coefficient

Seneca Foods  Lifeway Foods

Excellent diversification

The 3 months correlation between Seneca and Lifeway is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Seneca Foods Corp and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods 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 Lifeway Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeway Foods has no effect on the direction of Seneca Foods i.e., Seneca Foods and Lifeway Foods go up and down completely randomly.

Pair Corralation between Seneca Foods and Lifeway Foods

Assuming the 90 days horizon Seneca Foods Corp is expected to generate 1.9 times more return on investment than Lifeway Foods. However, Seneca Foods is 1.9 times more volatile than Lifeway Foods. It trades about 0.03 of its potential returns per unit of risk. Lifeway Foods is currently generating about -0.12 per unit of risk. If you would invest  7,980  in Seneca Foods Corp on November 28, 2024 and sell it today you would earn a total of  80.00  from holding Seneca Foods Corp or generate 1.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	31.03%
Values	Daily Returns

Seneca Foods Corp  vs.  Lifeway Foods

Seneca Foods Corp

Risk-Adjusted Performance

Good

Over the last 90 days Seneca Foods Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unsteady technical and fundamental indicators, Seneca Foods may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Lifeway Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lifeway Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Seneca Foods and Lifeway Foods

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

The idea behind Seneca Foods Corp and Lifeway Foods 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.