Correlation Between SENECA FOODS and EAGLE MATERIALS

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

Diversification Opportunities for SENECA FOODS and EAGLE MATERIALS

0.64

Correlation Coefficient

SENECA FOODS  EAGLE MATERIALS

Poor diversification

The 3 months correlation between SENECA and EAGLE is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding SENECA FOODS A and EAGLE MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EAGLE MATERIALS 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 EAGLE MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EAGLE MATERIALS has no effect on the direction of SENECA FOODS i.e., SENECA FOODS and EAGLE MATERIALS go up and down completely randomly.

Pair Corralation between SENECA FOODS and EAGLE MATERIALS

Assuming the 90 days trading horizon SENECA FOODS A is expected to generate 0.97 times more return on investment than EAGLE MATERIALS. However, SENECA FOODS A is 1.03 times less risky than EAGLE MATERIALS. It trades about 0.37 of its potential returns per unit of risk. EAGLE MATERIALS is currently generating about -0.26 per unit of risk. If you would invest  6,050  in SENECA FOODS A on September 16, 2024 and sell it today you would earn a total of  800.00  from holding SENECA FOODS A or generate 13.22% 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.  EAGLE MATERIALS

SENECA FOODS A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, SENECA FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

EAGLE MATERIALS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EAGLE MATERIALS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, EAGLE MATERIALS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SENECA FOODS and EAGLE MATERIALS

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

The idea behind SENECA FOODS A and EAGLE MATERIALS 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.