Correlation Between SENECA FOODS-A and Motorcar Parts

Can any of the company-specific risk be diversified away by investing in both SENECA FOODS-A and Motorcar Parts 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-A and Motorcar Parts into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SENECA FOODS A and Motorcar Parts of, you can compare the effects of market volatilities on SENECA FOODS-A and Motorcar Parts 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-A with a short position of Motorcar Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of SENECA FOODS-A and Motorcar Parts.

Diversification Opportunities for SENECA FOODS-A and Motorcar Parts

0.66

Correlation Coefficient

SENECA FOODS-A  Motorcar Parts

Poor diversification

The 3 months correlation between SENECA and Motorcar is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SENECA FOODS A and Motorcar Parts of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorcar Parts and SENECA FOODS-A 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 A are associated (or correlated) with Motorcar Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorcar Parts has no effect on the direction of SENECA FOODS-A i.e., SENECA FOODS-A and Motorcar Parts go up and down completely randomly.

Pair Corralation between SENECA FOODS-A and Motorcar Parts

Assuming the 90 days trading horizon SENECA FOODS-A is expected to generate 3.52 times less return on investment than Motorcar Parts. But when comparing it to its historical volatility, SENECA FOODS A is 2.58 times less risky than Motorcar Parts. It trades about 0.12 of its potential returns per unit of risk. Motorcar Parts of is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  685.00  in Motorcar Parts of on December 1, 2024 and sell it today you would earn a total of  355.00  from holding Motorcar Parts of or generate 51.82% return on investment over 90 days.

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

SENECA FOODS A  vs.  Motorcar Parts of

SENECA FOODS A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, SENECA FOODS-A exhibited solid returns over the last few months and may actually be approaching a breakup point.

Motorcar Parts

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Motorcar Parts of are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Motorcar Parts reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SENECA FOODS-A and Motorcar Parts

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

The idea behind SENECA FOODS A and Motorcar Parts of 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.