Correlation Between SENECA FOODS and Japan Steel

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

Diversification Opportunities for SENECA FOODS and Japan Steel

0.43

Correlation Coefficient

SENECA FOODS  Japan Steel

Very weak diversification

The 3 months correlation between SENECA and Japan is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding SENECA FOODS A and The Japan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Steel 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 Japan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Steel has no effect on the direction of SENECA FOODS i.e., SENECA FOODS and Japan Steel go up and down completely randomly.

Pair Corralation between SENECA FOODS and Japan Steel

Assuming the 90 days trading horizon SENECA FOODS is expected to generate 1.03 times less return on investment than Japan Steel. But when comparing it to its historical volatility, SENECA FOODS A is 1.31 times less risky than Japan Steel. It trades about 0.14 of its potential returns per unit of risk. The Japan Steel is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,080  in The Japan Steel on October 26, 2024 and sell it today you would earn a total of  620.00  from holding The Japan Steel or generate 20.13% return on investment over 90 days.

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

SENECA FOODS A  vs.  The Japan Steel

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.

Japan Steel

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Japan Steel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SENECA FOODS and Japan Steel

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

The idea behind SENECA FOODS A and The Japan Steel 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.