Correlation Between Danone SA and Seneca Foods

Can any of the company-specific risk be diversified away by investing in both Danone SA and Seneca Foods 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 Danone SA and Seneca Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Danone SA and Seneca Foods Corp, you can compare the effects of market volatilities on Danone SA and Seneca Foods 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 Danone SA with a short position of Seneca Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danone SA and Seneca Foods.

Diversification Opportunities for Danone SA and Seneca Foods

-0.83

Correlation Coefficient

Danone SA  Seneca Foods

Pay attention - limited upside

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

Pair Corralation between Danone SA and Seneca Foods

Assuming the 90 days horizon Danone SA is expected to generate 0.97 times more return on investment than Seneca Foods. However, Danone SA is 1.03 times less risky than Seneca Foods. It trades about 0.04 of its potential returns per unit of risk. Seneca Foods Corp is currently generating about 0.03 per unit of risk. If you would invest  4,937  in Danone SA on September 19, 2024 and sell it today you would earn a total of  1,948  from holding Danone SA or generate 39.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	90.93%
Values	Daily Returns

Danone SA  vs.  Seneca Foods Corp

Danone SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Danone SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Danone SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Seneca Foods Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Seneca Foods Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Seneca Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danone SA and Seneca Foods

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

The idea behind Danone SA and Seneca Foods Corp 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.