Correlation Between SENECA FOODS-A and DOLLAR TREE

Can any of the company-specific risk be diversified away by investing in both SENECA FOODS-A and DOLLAR TREE 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 DOLLAR TREE 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 DOLLAR TREE, you can compare the effects of market volatilities on SENECA FOODS-A and DOLLAR TREE 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 DOLLAR TREE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SENECA FOODS-A and DOLLAR TREE.

Diversification Opportunities for SENECA FOODS-A and DOLLAR TREE

0.81

Correlation Coefficient

SENECA FOODS-A  DOLLAR TREE

Very poor diversification

The 3 months correlation between SENECA and DOLLAR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SENECA FOODS A and DOLLAR TREE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOLLAR TREE 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 DOLLAR TREE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOLLAR TREE has no effect on the direction of SENECA FOODS-A i.e., SENECA FOODS-A and DOLLAR TREE go up and down completely randomly.

Pair Corralation between SENECA FOODS-A and DOLLAR TREE

Assuming the 90 days trading horizon SENECA FOODS A is expected to generate 0.76 times more return on investment than DOLLAR TREE. However, SENECA FOODS A is 1.32 times less risky than DOLLAR TREE. It trades about 0.11 of its potential returns per unit of risk. DOLLAR TREE is currently generating about -0.08 per unit of risk. If you would invest  4,160  in SENECA FOODS A on October 22, 2024 and sell it today you would earn a total of  2,690  from holding SENECA FOODS A or generate 64.66% return on investment over 90 days.

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

SENECA FOODS A  vs.  DOLLAR TREE

SENECA FOODS A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, SENECA FOODS-A exhibited solid returns over the last few months and may actually be approaching a breakup point.

DOLLAR TREE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DOLLAR TREE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, DOLLAR TREE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SENECA FOODS-A and DOLLAR TREE

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

The idea behind SENECA FOODS A and DOLLAR TREE 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.