Correlation Between Sovos Brands and Seneca Foods

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

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

Diversification Opportunities for Sovos Brands and Seneca Foods

0.1

Correlation Coefficient

Sovos Brands  Seneca Foods

Average diversification

The 3 months correlation between Sovos and Seneca is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sovos Brands 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 Sovos Brands 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 Sovos Brands 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 Sovos Brands i.e., Sovos Brands and Seneca Foods go up and down completely randomly.

Pair Corralation between Sovos Brands and Seneca Foods

Given the investment horizon of 90 days Sovos Brands is expected to generate 43.97 times less return on investment than Seneca Foods. But when comparing it to its historical volatility, Sovos Brands is 47.12 times less risky than Seneca Foods. It trades about 0.1 of its potential returns per unit of risk. Seneca Foods Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,053  in Seneca Foods Corp on September 20, 2024 and sell it today you would earn a total of  1,317  from holding Seneca Foods Corp or generate 21.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	46.84%
Values	Daily Returns

Sovos Brands  vs.  Seneca Foods Corp

Sovos Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sovos Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Sovos Brands is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Seneca Foods Corp

Risk-Adjusted Performance

0 of 100

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 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sovos Brands and Seneca Foods

The main advantage of trading using opposite Sovos Brands and Seneca Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sovos Brands 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 Sovos Brands 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.