Correlation Between Universal and Seneca Foods

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

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

Diversification Opportunities for Universal and Seneca Foods

0.75

Correlation Coefficient

Universal  Seneca Foods

Poor diversification

The 3 months correlation between Universal and Seneca is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Universal 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 Universal 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 Universal 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 Universal i.e., Universal and Seneca Foods go up and down completely randomly.

Pair Corralation between Universal and Seneca Foods

Considering the 90-day investment horizon Universal is expected to generate 2.6 times less return on investment than Seneca Foods. But when comparing it to its historical volatility, Universal is 1.16 times less risky than Seneca Foods. It trades about 0.06 of its potential returns per unit of risk. Seneca Foods Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7,938  in Seneca Foods Corp on December 30, 2024 and sell it today you would earn a total of  1,097  from holding Seneca Foods Corp or generate 13.82% return on investment over 90 days.

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

Universal  vs.  Seneca Foods Corp

Universal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Seneca Foods Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Seneca Foods Corp are ranked lower than 10 (%) 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.

Pair Trading with Universal and Seneca Foods

The main advantage of trading using opposite Universal and Seneca Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal 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 Universal 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.