Correlation Between Seneca Foods and Lancaster Colony

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

Diversification Opportunities for Seneca Foods and Lancaster Colony

0.22

Correlation Coefficient

Seneca Foods  Lancaster Colony

Modest diversification

The 3 months correlation between Seneca and Lancaster is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Seneca Foods Corp and Lancaster Colony in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancaster Colony 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 Lancaster Colony. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancaster Colony has no effect on the direction of Seneca Foods i.e., Seneca Foods and Lancaster Colony go up and down completely randomly.

Pair Corralation between Seneca Foods and Lancaster Colony

Assuming the 90 days horizon Seneca Foods Corp is expected to generate 100.69 times more return on investment than Lancaster Colony. However, Seneca Foods is 100.69 times more volatile than Lancaster Colony. It trades about 0.15 of its potential returns per unit of risk. Lancaster Colony is currently generating about 0.09 per unit of risk. If you would invest  6,090  in Seneca Foods Corp on September 2, 2024 and sell it today you would earn a total of  1,114  from holding Seneca Foods Corp or generate 18.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	56.25%
Values	Daily Returns

Seneca Foods Corp  vs.  Lancaster Colony

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.

Lancaster Colony

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lancaster Colony are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Lancaster Colony may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Seneca Foods and Lancaster Colony

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

The idea behind Seneca Foods Corp and Lancaster Colony 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.