Correlation Between Lifeway Foods and Seneca Foods

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

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

Diversification Opportunities for Lifeway Foods and Seneca Foods

-0.1

Correlation Coefficient

Lifeway Foods  Seneca Foods

Good diversification

The 3 months correlation between Lifeway and Seneca is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Lifeway Foods 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 Lifeway 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 Lifeway Foods 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 Lifeway Foods i.e., Lifeway Foods and Seneca Foods go up and down completely randomly.

Pair Corralation between Lifeway Foods and Seneca Foods

Given the investment horizon of 90 days Lifeway Foods is expected to generate 53.98 times less return on investment than Seneca Foods. But when comparing it to its historical volatility, Lifeway Foods is 42.75 times less risky than Seneca Foods. It trades about 0.12 of its potential returns per unit of risk. Seneca Foods Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,090  in Seneca Foods Corp on August 30, 2024 and sell it today you would earn a total of  1,280  from holding Seneca Foods Corp or generate 21.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	56.25%
Values	Daily Returns

Lifeway Foods  vs.  Seneca Foods Corp

Lifeway Foods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lifeway Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lifeway Foods showed solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady 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 Lifeway Foods and Seneca Foods

The main advantage of trading using opposite Lifeway Foods and Seneca Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifeway Foods 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 Lifeway Foods 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.