Correlation Between Seneca Foods and Ingredion Incorporated

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

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

Diversification Opportunities for Seneca Foods and Ingredion Incorporated

0.7

Correlation Coefficient

Seneca Foods  Ingredion Incorporated

Poor diversification

The 3 months correlation between Seneca and Ingredion is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Seneca Foods Corp and Ingredion Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ingredion Incorporated 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 Corp are associated (or correlated) with Ingredion Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ingredion Incorporated has no effect on the direction of Seneca Foods i.e., Seneca Foods and Ingredion Incorporated go up and down completely randomly.

Pair Corralation between Seneca Foods and Ingredion Incorporated

Assuming the 90 days horizon Seneca Foods Corp is expected to generate 0.77 times more return on investment than Ingredion Incorporated. However, Seneca Foods Corp is 1.3 times less risky than Ingredion Incorporated. It trades about 0.18 of its potential returns per unit of risk. Ingredion Incorporated is currently generating about 0.08 per unit of risk. If you would invest  5,970  in Seneca Foods Corp on August 31, 2024 and sell it today you would earn a total of  1,240  from holding Seneca Foods Corp or generate 20.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Seneca Foods Corp  vs.  Ingredion Incorporated

Seneca Foods Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Seneca Foods Corp are ranked lower than 14 (%) 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.

Ingredion Incorporated

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ingredion Incorporated are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Ingredion Incorporated may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Seneca Foods and Ingredion Incorporated

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

The idea behind Seneca Foods Corp and Ingredion Incorporated 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.