Correlation Between SENECA FOODS and Tempur Sealy

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

Diversification Opportunities for SENECA FOODS and Tempur Sealy

0.82

Correlation Coefficient

SENECA FOODS  Tempur Sealy

Very poor diversification

The 3 months correlation between SENECA and Tempur is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SENECA FOODS A and Tempur Sealy International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tempur Sealy Interna 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 Tempur Sealy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tempur Sealy Interna has no effect on the direction of SENECA FOODS i.e., SENECA FOODS and Tempur Sealy go up and down completely randomly.

Pair Corralation between SENECA FOODS and Tempur Sealy

Assuming the 90 days trading horizon SENECA FOODS A is expected to generate 1.06 times more return on investment than Tempur Sealy. However, SENECA FOODS is 1.06 times more volatile than Tempur Sealy International. It trades about 0.11 of its potential returns per unit of risk. Tempur Sealy International is currently generating about 0.08 per unit of risk. If you would invest  5,150  in SENECA FOODS A on September 15, 2024 and sell it today you would earn a total of  1,700  from holding SENECA FOODS A or generate 33.01% 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.  Tempur Sealy International

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.

Tempur Sealy Interna

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tempur Sealy International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Tempur Sealy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SENECA FOODS and Tempur Sealy

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

The idea behind SENECA FOODS A and Tempur Sealy International 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.