Correlation Between Penn National and SENECA FOODS

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

By analyzing existing cross correlation between Penn National Gaming and SENECA FOODS A, you can compare the effects of market volatilities on Penn National 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 Penn National with a short position of SENECA FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penn National and SENECA FOODS.

Diversification Opportunities for Penn National and SENECA FOODS

0.77

Correlation Coefficient

Penn National  SENECA FOODS

Poor diversification

The 3 months correlation between Penn and SENECA is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Penn National Gaming and SENECA FOODS A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SENECA FOODS A and Penn National 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 Penn National Gaming 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 A has no effect on the direction of Penn National i.e., Penn National and SENECA FOODS go up and down completely randomly.

Pair Corralation between Penn National and SENECA FOODS

Assuming the 90 days horizon Penn National is expected to generate 24.03 times less return on investment than SENECA FOODS. In addition to that, Penn National is 1.32 times more volatile than SENECA FOODS A. It trades about 0.01 of its total potential returns per unit of risk. SENECA FOODS A is currently generating about 0.28 per unit of volatility. If you would invest  6,300  in SENECA FOODS A on September 18, 2024 and sell it today you would earn a total of  900.00  from holding SENECA FOODS A or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Penn National Gaming  vs.  SENECA FOODS A

Penn National Gaming

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Penn National reported solid returns over the last few months and may actually be approaching a breakup point.

SENECA FOODS A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, SENECA FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penn National and SENECA FOODS

The main advantage of trading using opposite Penn National and SENECA FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penn National 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's long position.

The idea behind Penn National Gaming and SENECA FOODS A 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.