Correlation Between SENECA FOODS and China Resources
Can any of the company-specific risk be diversified away by investing in both SENECA FOODS and China Resources 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 China Resources 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 China Resources Beer, you can compare the effects of market volatilities on SENECA FOODS and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of SENECA FOODS and China Resources.
Diversification Opportunities for SENECA FOODS and China Resources
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SENECA and China is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding SENECA FOODS A and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 A are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of SENECA FOODS i.e., SENECA FOODS and China Resources go up and down completely randomly.
Pair Corralation between SENECA FOODS and China Resources
Assuming the 90 days trading horizon SENECA FOODS A is expected to generate 0.58 times more return on investment than China Resources. However, SENECA FOODS A is 1.74 times less risky than China Resources. It trades about 0.24 of its potential returns per unit of risk. China Resources Beer is currently generating about -0.08 per unit of risk. If you would invest 5,400 in SENECA FOODS A on October 1, 2024 and sell it today you would earn a total of 1,900 from holding SENECA FOODS A or generate 35.19% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
SENECA FOODS A vs. China Resources Beer
Performance |
Timeline |
SENECA FOODS A |
China Resources Beer |
SENECA FOODS and China Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SENECA FOODS and China Resources
The main advantage of trading using opposite SENECA FOODS and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SENECA FOODS position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.SENECA FOODS vs. Pembina Pipeline Corp | ||
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Check out your portfolio center.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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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