Correlation Between SENECA FOODS-A and Merck

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

Diversification Opportunities for SENECA FOODS-A and Merck

-0.83

Correlation Coefficient

SENECA FOODS-A  Merck

Pay attention - limited upside

The 3 months correlation between SENECA and Merck is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding SENECA FOODS A and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company 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 Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of SENECA FOODS-A i.e., SENECA FOODS-A and Merck go up and down completely randomly.

Pair Corralation between SENECA FOODS-A and Merck

Assuming the 90 days trading horizon SENECA FOODS A is expected to generate 1.31 times more return on investment than Merck. However, SENECA FOODS-A is 1.31 times more volatile than Merck Company. It trades about 0.07 of its potential returns per unit of risk. Merck Company is currently generating about -0.08 per unit of risk. If you would invest  7,300  in SENECA FOODS A on December 27, 2024 and sell it today you would earn a total of  500.00  from holding SENECA FOODS A or generate 6.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

SENECA FOODS A  vs.  Merck Company

SENECA FOODS A

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, SENECA FOODS-A may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Merck Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with SENECA FOODS-A and Merck

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

The idea behind SENECA FOODS A and Merck Company 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..